Case Type: business competition/competitive benchmarking; improve profitability.
Consulting Firm: Capital One 2nd round job interview.
Industry Coverage: financial services.
Case Interview Question #00320: You are consulting to D. E. Shaw & Co., a global investment management firm based in New York City, New York, United States. The company is best known as a hedge fund that makes extensive use of quantitative technologies and qualitative trading strategies to manage 
its investments. The firm’s trading mode is systematic and computer-driven. The company also makes private equity investments in technology, wind power, real estate, and financial service firms and in distressed company financing.
The client D. E. Shaw & Co. provides investment management and financial advisory services to institutional clients, financial intermediaries, private clients, and investment vehicles around the world. Clients must invest a minimum of $1,000,000. This money will be invested by the client’s personal portfolio manager in stocks and bonds such that the portfolio created is in line with the client’s personal goals. The price they charged for portfolio management is 1 basis point plus an annual fee. The firm recently benchmarked other hedge funds and investment management firms. They found that their profitability was lower than the competition. What would you recommend the client to do to regain competitive advantage?
Possible Answer:
For this profitability and competitive benchmarking case, it is totally OK to know nothing about hedge fund or investment
Below are some of my thoughts. Please correct me if I’m wrong.
Since the company is positioned at the average level in the industry, changes to elements like management and annual fees will also affect the profitability with a average level, unless certain factors or numbers are given (ie: increasing management fee by certain amount won’t change the portfolio).
So in order to increase the profit, changes should be taken internally first. Considering the fact that this company is in a fee driven industry, decreasing the purposes of these fees would be quite straightforward. One example is to reduce the fixed cost such as rent, or variable such as personnel expenses.