In just a few hours, SAC Capital Advisors will know how much money investors plan to pull from the hedge fund, and it isn't likely to be happy with the answer.
Investors pulled $1.7 billion from the embattled firm in February, but are set to redeem more than twice as much today, SAC's second-quarter redemption deadline. If the firm's estimate of roughly $3.5 billion is correct—and its February estimate was $700 million lower than actually suffered—it will have to pay out more than half of its remaining outside capital by the end of the year.
Investors who redeem today will receive one-third of their money each quarter. SAC, which normally allows clients to redeem only one-quarter of their money per calendar quarter, has eased redemption terms in an effort to stave off massive withdrawals as it battles an insider-trading investigation. The firm postponed its second-quarter redemption notice deadline to today from the middle of last month.
If SAC suffers the expected redemptions, it will be left with about $11 billion, of which about $9 billion belongs to founder Steven Cohen and firm staffers.
In recent weeks, several major SAC investors, notably the Blackstone Group and Ironwood Capital, have moved to redeem most, if not all, of their money with the hedge fund. The latest to join the redeemers is $3.1 billion fund of hedge funds Magnitude Capital, which already pulled some of its money in February. The firm plans to submit another redemption notice today, Reuters reports.
SAC believed that it had settled its most serious legal issues stemming from a series of insider-trading probes in March, when it agreed to pay a $616 million settlement with the Securities and Exchange Commission. But the firm, which has denied any wrongdoing, was disabused of that notion about a month ago at a meeting between its lawyers and prosecutors.
The government faces a July deadline to file criminal fraud charges against SAC or Cohen. But prosecutors are considering racketeering charges against the hedge fund, which would give them another five years to bring claims.
Last month, SAC said it was no longer cooperating unconditionally with the federal investigation and that it would stop providing clients updates on the matter after six executives, including Cohen, were subpoenaed by a grand jury considering criminal charges against the firm. And Cohen is reportedly considering returning all outside capital and turning SAC into a family office.