Friday, 9 December 2016
Last updated 17 hours ago
Jan 11 2013 | 1:44pm ET
Under an insider-trading cloud, SAC Capital Advisors expects clients to redeem at least $1 billion next month.
The $14 billion Stamford, Conn.-based hedge fund giant has been mentioning the figure in talks with advisers and top employees, The Wall Street Journal reports. Withdrawals of that amount would account for one-sixth of outside capital invested with SAC.
While damaging, the redemptions of that size would not have too much of an impact on SAC. More than half of the money it manages—$8 billion—belongs to founder Steven Cohen and employees of the firm. In addition, clients can withdraw only 25% of their assets each quarter, meaning it will take a year to pull all $1 billion.
SAC clients have until Feb. 15 to file redemption notices.
Until recently, the idea of pulling one's money from SAC would have been laughable. The firm has posted enviable returns year after year and is usually closed to new investment, meaning that it might not be possible to reinvest with the firm after redeeming. But it has become clear that federal investigators are targeting SAC in their insider-trading investigation; eight current or former employees have been charged in the current crackdown, with others named in Securities and Exchange Commission lawsuits or as unindicted co-conspirators in criminal cases. Most recently, former portfolio manager Mathew Martoma was arrested and charged with insider-trading; authorities have reportedly sought his assistance—unsuccessfully—in building a case against Cohen. In addition, the SEC has informed SAC that it is likely to bring an enforcement action against the hedge fund.
Martoma pleaded not guilty to fraud charges earlier this month.
SAC has been reaching out to large investors in an effort to stave off some redemptions. During those conversations, the firm has reportedly expressed confidence that Cohen will not be criminally charged and that it expects no worse than a large fine. In addition, the firm recently increased bonuses for portfolio managers in an effort to hold on to staff.