A deal with a Japanese bank that could have blunted the impact of expected redemptions at SAC Capital Advisors fell through as the hedge fund found itself at the center of an insider-trading scandal.
SAC and Mizuho Financial Group spent a year discussing an investment that could have brought $500 million into the $14 billion firm's coffers, The Wall Street Journal reports. But Mizuho decided late last year not to move forward, a decision that appears to be final.
It is unclear whether the growing insider-trading cloud, including the arrest of a former portfolio manager in November and a likely Securities and Exchange Commission lawsuit, played a role in Mizuho's decision to shy away from SAC.
SAC is reportedly preparing for roughly $1 billion in redemptions. The firm has said it does not expect the withdrawals to have a material impact; more than half of SAC's money is internal capital.
SAC has denied any wrongdoing. But it is preparing for the possibility that Feb. 15's redemptions will be only the beginning. While SAC founder Steven Cohen—thought to be the target of both the criminal and civil investigations into the hedge fund—is adamant that SAC continue to manage outside money, the firm has discussed what to do if redemptions continue. The contingency plans for a smaller firm includes layoffs.
The firm is also seeking to convince investors to stick with it and to find new investors to replace those redeeming. According to the Journal, SAC marketers have reached out to investors and consultants, and will meet with some of them at Morgan Stanley's hedge fund conference in Florida this month. SAC, which is not used to begging for money, will host a golf-and-dinner outing this weekend.