Thursday, 24 July 2014
Last updated 3 min ago
Oct 4 2013 | 12:22pm ET
SAC Capital Advisors' year-old reinsurance business looks like another casualty of the criminal insider-trading charges against the hedge fund.
SAC has informally approached several firms about buying Bermuda-based SAC Re, which it launched last summer with $500 million in initial capital. Fellow hedge fund Pine River Capital Management is among the potential buyers.
The hedge fund began gauging interest in SAC Re soon after its July indictment; that month, insurance ratings agency A.M. Best put the company on watch, warning about "reputational risk." The business may also simply be wound down and closed, according to published reports.
SAC launched SAC Re, which invests its premiums with the hedge fund, with private-equity firm Capital Z Partners; SAC founder Steven Cohen owns 25% of the firm's equity personally. The company's assets have grown to $570 million, thanks to SAC's strong performance.
While SAC denies any wrongdoing, it is currently in settlement talks with federal prosecutors and the Securities and Exchange Commission. The hedge fund and Capital Z fear that the negative publicity surrounding SAC will drive clients away, especially given the large and growing number of players in the reinsurance business. But the company could be attractive to buyers, given its established management team. A deal may need to be completed soon, however, if SAC Re is to participate in the end-of-year reinsurance contract renewal season.
Terms of any settlement may force SAC and SAC Re to part ways, anyway: A deal might bar the hedge fund from managing outside capital, which would prevent SAC from managing the reinsurer's premiums. SAC has considered becoming a family office, which would trade Cohen's capital exclusively; almost all of its outside investors have already filed to redeem from the firm.
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…