SAC Capital Advisors LP plans to shut its London office as the $14 billion hedge-fund firm founded by Steven A. Cohen scales back in the face of insider-trading allegations by U.S. prosecutors.
SAC, based in Stamford, Connecticut, will close the U.K. office by the end of the year, President Tom Conheeney wrote in a memo sent to employees today. SAC employs more than 50 people in London, according to a person with direct knowledge of the matter, who asked not to be identified because the firm is private. SAC this week cut six investment jobs in the U.S., Conheeney wrote.
“It has become clear to us that the outcome the government is demanding is likely to have a greater than first anticipated impact on the firm,” Conheeney wrote. “We have concluded that we must operate as a simpler firm and reduce our capital allocations.”
Money managers have been leaving SAC’s U.K. office after a U.S. grand jury indicted the firm in July on allegations that it engaged in unprecedented illegal trading for more than a decade, prompting clients to pull almost all their cash. Cohen, whose 21-year-old firm is negotiating a settlement with the government, is likely to be barred from managing other peoples’ money and pay a fine of $1.8 billion, people with knowledge of the talks said this month.
Jonathan Gasthalter, a spokesman for SAC, declined to comment on the closing of the London office and the U.S. job cuts. At the time of the indictment, SAC said it never encouraged, promoted or tolerated illegal trading.
SAC is accused of encouraging its traders to obtain information from company insiders while ignoring indications it was illegal. Six former SAC employees have pleaded guilty to trading on inside information, and two more are scheduled to go on trial. The alleged illicit trading, which involved more than 20 companies and went back as far as 1999, helped reap hundreds of millions of dollars in illicit profits, the U.S. said.
SAC employees have been sending out resumes to hedge-fund firms and recruiters since the indictment, hoping to land jobs next year when they expect the firm will need far fewer employees. As of Sept. 20, SAC employed 950 people globally, according to a regulatory filing, about 50 fewer than it did in April. About 400 of those employees were investment professionals, about the same as in April, according to filings.
Conheeney, who visited the London office today with SAC Chief Operating Officer Solomon Kumin, according to the memo, said the firm doesn’t “anticipate any further material changes in investment personnel headcount.”
SAC had 18 partners in its London-based SAC Global Investors LLP at the end of 2012, according to a U.K. filing. The unit’s profit almost tripled last year to 31 million pounds ($50 million), which was intended to be distributed to its partners, the filing shows.
Beginning in 2000, SAC managed money in Europe through a company called Walter Capital Management LLP, founded by SAC alumni Rich Walter. It bought a stake in the business in 2004 and in 2008 renamed the firm, U.K. regulatory filings show.
The office is now run by Michael Ferrucci, a former equity sales person at Deutsche Bank AG, and employs money managers who primarily trade stocks of companies based in Europe, Eastern Europe and Russia, according to a person with direct knowledge of the situation. After SAC suffered losses during the 2008 financial crisis, it cut the number of traders based in London to four from 14, said the person, who asked not to be identified because the firm is private.
SAC rebuilt the London office when markets rebounded after the crisis and it became profitable again, hiring money managers including Lia Forcina and her analyst husband Giovanni Rubino from hedge-fund firm Fenician Capital Management LLP, the person said. Others who joined included Robert Harris from UBS O’Connor and Muhammed Yesilhark from York Capital Management LP.
Forcina, 39, quit this month to join BlueCrest Capital Management LLP, three people with knowledge of the matter said last week. Other traders who’ve left SAC this year have also joined BlueCrest and Millennium Management LLC.
SAC didn’t disclose the names of the U.S. money managers who lost their jobs. The firm will start 2014 with about $9 billion in assets, almost all of it belonging to Cohen, 57, according to a person with knowledge of the situation.
Cohen increased 2014 bonuses by 3.5 percentage points in an effort to retain employees, a person with knowledge of the matter said last month. SAC money managers are typically paid an annual bonus of 15 percent to 25 percent of the profits they generate from their investments.