SAC Capital to remain a hedge fund amid client redemptions, but it’s too early to claim victory
SAC Capital, under a cloud of insider-trading allegations, told employees it will survive as a hedge fund. In an email to employees sent yesterday, SAC President Tom Conheeney said the withdrawals of client money were “significant” but the hedge fund still has a stable capital base, according to a Bloomberg report.
That means SAC will not turn into a family office structure and will continue to manage money for outside clients, in addition to the $9 billion belonging to founder Steve Cohen and other employees. Quartz wrote earlier that if SAC faced enough investor withdrawals by the June 3 deadline, it could become a family office by default. And despite what SAC says now, it still faces that possibility because it could face additional redemptions down the line.
US authorities have yet to decide whether they are going to bring a criminal case against SAC. There has also been speculation that the most recent arrest of SAC portfolio manager Matthew Steinberg could eventually lead to the prosecution of Cohen. Steinberg is the most senior SAC worker who has been arrested. Cohen has been subpoenaed but he has not been accused of any wrongdoing.
So far, at least nine current and former SAC employees have been linked to the insider trading accusations. Trial dates for two of them, including Steinberg, have been set for November. As the ring around SAC has grown, so has the number of clients fleeing with their money. Some media reported that the firm could be left with around $1 billion of $4 billion in outside investor money by the time the redemptions were calculated this week.
It looks like the fight with authorities will only get worse since Cohen has taken on a defiant stance, while SAC has said it would limit cooperation with authorities. If there is a criminal case against SAC, or the prosecution broadens to include Cohen, the likely additional withdrawals of client money will be the least of their worries.
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