Steven Cohen’s $14 billion SAC Capital Advisors LP, which last month was indicted by the government as a “veritable magnet for market cheaters,” has refused clients’ requests that the firm speed up payouts on the billions of dollars earmarked for withdrawals, according to three people familiar with the discussions.
SAC, which faces a midnight deadline for redemption requests from investors who want to pull money from the firm, has told clients that final payments will be made at the end of the year. Some investors have pushed Cohen to give clients their money back before then, fearing that the government could freeze the funds’ assets, said the people, who asked not to be identified because Stamford, Connecticut-based SAC is private. The government has said it doesn’t plan on restraining assets.
SAC started the year with $15 billion of assets, about $6 billion of which belonged to outsiders. As insider-trading probe against the firm intensified, clients redeemed more than $3 billion in the first half of 2013, which is being returned over the course of this year. SAC’s executives have said they expect the firm to start 2014 with about $9 billion in assets and that virtually all outside investors will be gone by then, according to people familiar with the firm.
Jonathan Gasthalter, a spokesman for SAC at Sard Verbinnen & Co., declined to comment on the redemptions.
On July 25, prosecutors announced criminal charges against SAC, saying it engaged in an unprecedented, decade-long insider-trading scheme. The government cited separate alleged insider-trading schemes by at least eight current and former fund managers and analysts. Six days earlier, the U.S. Securities and Exchange Commission, in an administrative action, said Cohen failed to supervise two employees who have been charged with insider trading.
At least 11 former or current SAC employees have been linked to insider-trading while at the firm, most of them working on technology and health-care stocks.
Cohen, 57, has sought to assure employees that business will continue as usual at the 21-year-old hedge-fund firm, though with less money to manage, employees are expecting layoffs.
“SAC is under no obligation to be more generous than the terms it negotiated with investors,” said Ron Geffner, a partner at Sadis & Goldberg in New York. “For Cohen to return assets would be inconsistent with his message that it’s business as usual.”
Cohen mainly invests in a diverse selection of widely held stocks, which are easy to sell. He doesn’t amass large or concentrated positions. As of June 30, only four of SAC’s 1,549 U.S. stock holdings had a market value of more than $200 million: Micron Technology Inc., Zoetis Inc., Schlumberger Ltd. and Amazon.com Inc., according to a filing with the SEC.
Clients who haven’t put in redemption notices in previous quarters have until today to do so, according to the people. The redeeming investors will get half their money back at the end of the third quarter and the other half at the end of the year.
By keeping assets in the fund until the end of 2013, Cohen will have more time to earn his fees of 3 percent of assets and up to 50 percent of any investment gains.
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