SAC Investors Weigh Options

Dec 3 2012 | 11:32am ET

With less than three months to decide whether or not to stick with SAC Capital Advisors, investors are plotting their moves in the wake of the insider-trading scandal building around the hedge fund.

Clients have until Feb. 15 to put in redemption notices. Some have already done so, some are considering it and some have given SAC their—possibly temporary—vote of confidence, The Wall Street Journal reports.

During a conference call with investors last week, SAC President Tom Conheeney said he hoped they would "feel comfortable" sticking with the $14 billion firm, but that he would "understand" if they did not.

SAC's woes include the arrest of a former portfolio manager for insider trading and word from the Securities and Exchange Commission that it plans to charge the hedge fund with fraud. Published reports also indicate that the SEC hopes to extend those fraud charges to SAC founder Steven Cohen himself. It could be months, however, before a lawsuit is actually filed.

SAC has denied any wrongdoing.

Some investors aren't waiting, including Société Générale's Lyxor Asset Management, which has filed a redemption request, according to the Journal. Others, including Ironwood Capital Management and Morgan Stanley, have told clients they are staying put—for now—and carefully monitoring the situation.

Still others say they're not budging.

"The SAC portfolio is liquid enough that I'm not terribly concerned," Greycourt & Co.'s Gregory Curtis told the Journal. "I very much hope that Cohen hasn't been behaving badly, but either way I'm not too concerned about our client positions."

Another SAC investor, SkyBridge Capital's Anthony Scaramucci, gave Cohen an even bigger vote of confidence. "There are people in our industry that are rogues," he told CNBC. "I don't think Steve Cohen is one of them."

Chapwood Capital's Ed Butowsky told the Financial Times, "I haven't blinked once since this happened. Allegations do not equal facts."

Even if clients wanted to get out of SAC, it will take them a full year to do so: SAC rules allow the withdrawal of only one-quarter of an investor's money every quarter. And SAC has moved to reassure investors.

"So far, the response from SAC has been adequate," one investment advisers, whose clients are invested with SAC, told the Journal. "The risk will be, and what clients will be looking out for, is if they hear teams are leaving."

What's more, those who flee are unlikely to be able to get back into SAC should the clouds clear.


In Depth

Malik: The Science of Deal Sourcing 201

Aug 27 2015 | 5:35pm ET

Deal sourcing is understandably a hot topic among private equity firms because it...

Lifestyle

Rolling Art Advisors Marketing Collectible Car Fund As Uncorrelated Alternative

Aug 27 2015 | 6:47pm ET

A new fund is trying to provide investors with greater access to an emerging asset...

Guest Contributor

Agecroft Partners: Hedge Fund Industry Assets to increase $250B by Summer 2016

Aug 11 2015 | 11:29am ET

Assets will continue to flow into the hedge fund industry despite long-standing...

 

Editor's Note