SAC’s Cohen Opens Up

Mar 3 2010 | 6:38am ET

The hedge fund industry is changing, forcing even the most secretive and successful managers to open up a little. And Steven Cohen is no exception.

Cohen, who is famous for his media reticence and effort to keep pictures of himself out of public hands, has long resisted the pressure to meet even with prospective investors. But in the wake of the Ponzi scheme run by Bernard Madoff—who was also famously secretive about his investment management operations—simply reopening to new investments isn’t enough, even for such a highly sought management team as Cohen’s SAC Capital Advisors.

And so on a windy January day, Cohen found himself on a Florida golf course, chatting up some two dozen clients and potential clients while impressing them with his long game.

Cohen’s newfound sociability stems from the same place as his investing acumen: He sees an opportunity, Bloomberg Markets reports, to boost his own firm as the industry struggles, as well as a need to appear more open and transparent.

On the same trip to Florida, Cohen also sought to recruit investors at Morgan Stanley’s annual hedge fund conference. He also recently went on a fundraising tour of Europe and last year spoke at a Goldman Sachs hedge fund conference.

According to Bloomberg, the charm offensive is working: SAC took in some $1.3 billion in the second half of last year, almost one-tenth of the money raised by all hedge funds during the period.

During the hedge fund heyday before 2008’s crash, Cohen almost certainly could have raised even more money than he has in recent months, but kept many of his firm’s funds closed to new investment. But as with several of his protégés, the 53-year-old Cohen has begun thinking about succession and building a firm that will outlive him, according to Bloomberg. The money he’s raising will, in part, go towards hiring and mentoring new investment teams to ensure SAC’s future.

The long Bloomberg Markets article also offers a rare peak inside SAC’s Stamford, Conn., offices.

From his “perch” at the center of SAC’s trading floor, Cohen looks out on 180 traders and portfolio managers. He’s not easy to work for: One employee told Bloomberg Markets that, “Do you even know how to do this fucking job?” is a frequently-asked question.

Working for SAC is compared to working for the World Series champion New York Yankees—failure is not an option. Even in the early days, “he ripped into everybody,” Dan Cherniack, one of SAC’s earliest employees, told Bloomberg. On Sundays, from 5 p.m. until 9 p.m., portfolio managers and analysts must call Cohen to give him a sneak peak on the upcoming week.

And if you don’t cut it, you’re out: A dozen portfolio managers and there teams were tossed in 2008, when SAC lost 19%. Manager’s contracts allow the firm to take away half their assets if they lose 5%, and everything if they drop 10%.

Despite the turnover, it’s no easy thing to get a job at the firm: The process can take more than a year, with multiple interview rounds—including with Cohen himself. There are also background checks.

Despite everything, Cohen is described as having a dry sense of humor, not unlike that of Jerry Seinfeld, by former employees.

“It’s all up to the government now. I have no idea what will happen,” Cohen wrote in a firm-wide email just before Lehman Brothers collapsed in 2008. “Good luck to you all. This is a recording.”

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