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How Sad Will SAC Capital's Redemption Song Get?

Michael Steinberg, SAC Capital Advisors LP fund manager, exits federal court in New York, on March 29, 2013
Michael Steinberg, SAC Capital Advisors LP fund manager, exits federal court in New York, on March 29, 2013Photograph by Jonathan Fickies/Bloomberg

As the June 3 investor-withdrawal window comes and goes, early indications suggest that SAC Capital may look very different by the end of the year. There could be as little as $1 billion of outside client money left in the fund after today’s redemption deadline, according to Bloomberg News. The only money Cohen can count on at this point is his own, which, at $7.5 billion, is an enormous sum but would be only a shadow of what was once one of the mightiest trading forces on Wall Street. The most significant sign of what is to come may have been the decision by Blackstone Group, SAC’s largest outside investor, to redeem close to $400 million, the majority of its investment with the firm.

Blackstone was not comforted by the record $602 million civil settlement SAC reached in March with the Securities and Exchange Commission over the firm’s liability for alleged illegal trading in drug stocks Elan and Wyeth, according to a person familiar with the matter. The Elan and Wyeth trades are at the heart of ongoing civil and criminal cases against former SAC portfolio manager Mathew Martoma, who has pleaded not guilty. SAC also agreed to pay $14 million to the SEC to resolve the firm’s liability for trading in tech stocks Dell and Nvidia, which form the basis of charges against current SAC portfolio manager Michael Steinberg, who has pleaded not guilty. “These settlements are a substantial step toward resolving all outstanding regulatory matters and allow the firm to move forward,” SAC spokesman Jonathan Gasthalter said at the time of the settlements.