* Feb. 14 is deadline for investors to withdraw money
* Cohen under scrutiny in federal insider trading probe
* Redemptions come as firm eliminates four energy positions
By Svea Herbst-Bayliss and Katya Wachtel
NEW YORK, Feb 14 (Reuters) - Outside investors in Steven A. Cohen's SAC Capital Advisors have until the end of the day to decide if they still love the embattled billionaire hedge fund manager.
Cohen already has told staff to expect outside investors in SAC Capital to submit requests to withdraw up to $1 billion in the wake of the latest round of insider trading allegations involving former employees of the $14 billion hedge fund.
The big question as the deadline for submitting redemption notices approaches is whether the withdrawals will exceed Cohen's own estimate.
With outside investors accounting for about $6 billion of the firm's money under management, the impact of the redemptions may prove to be more symbolic than anything else. Roughly 60 percent of SAC Capital's money comes from dollars invested by Cohen and his employees.
Already, Titan Advisors, Citigroup's private bank and Lyxor Asset Management have announced they want to withdraw money on behalf of their investors. Sources familiar with SAC Capital said those three combined have between $300 million and $500 million invested with Cohen's hedge fund.
SAC Capital spokesman Jonathan Gasthalter said: "We do not expect the redemptions by certain external investors to have a significant impact on our funds."
In an unrelated move, SAC Capital recently dismissed two energy trading portfolio managers and two analysts, said a source familiar with the firm. The dismissals come on the heels of an earlier decision by Cohen to close the firm's Chicago office and eliminate the jobs of four teams of portfolio managers and analysts.
A person close to SAC Capital characterized the layoffs as part of the normal year-end performance review process at the hedge fund.
Until now, Cohen's outside investors have stood by him as the government investigated allegations of insider trading at SAC Capital for at least six year.
One reason investors have stuck with Cohen is because he has delivered annualized average returns of about 25 percent since his firm was launched. SAC Capital's flagship fund gained 13 percent last year, when hedge funds on average only returned 6 percent.
But following last November's arrest of former SAC portfolio manager Mathew Martoma in one of the most lucrative insider trading schemes on record, some investors are losing patience. That said, many investors, which include high net worth individuals and family offices, will not say what they are doing.
In a potential move to limit redemption requests, SAC Capital is offering a bit more favorable withdrawal terms to investors who keep their money with Cohen but decide to leave in the second quarter of the year, said a person familiar with the fund.
Right now investors who redeem in the first quarter will get their money spread out over the four quarters of this year. The manager has decided to treat investors who wait to redeem until the second quarter no differently than ones who redeem now.
In other words, investors who wait to redeem won't be at disadvantage to early redeemers.
It's still not clear just who else is staying and leaving.
HSBC, which as of September 2012 had an investment in SAC Capital through a fund of funds unit, declined to comment on whether it was considering redeeming.
Blackstone Group LP, one of Cohen's largest outside investors with roughly $550 million invested, has not publicly said whether it will keep its clients' money with SAC Capital. But as of last week, several investors in a Blackstone fund that have money with SAC Capital said the private equity firm had given no indication it planned to redeem.
Ironwood Funds, which has money with SAC Capital, declined to comment.
One allocator of investor money who is sticking with SAC is Anthony Scaramucci of Skybridge Capital.
"People who know and love him the most are staying with him," Scaramucci said of Cohen. "And the lemmings are leaving."
In the fourth quarter of 2012, investors redeemed several hundred million dollars from SAC Capital, said two people familiar with those withdrawals. Those redemption notices were submitted before Martoma's arrest in November and coincided with a period of heavy investor redemptions across the $2 trillion hedge fund industry.
Nonetheless, in the days leading up to Thursday's Valentine's Day deadline, Cohen and his top deputies were said to be working the phones to convince investors to stay put. The hedge fund has assured investors that Cohen has done nothing wrong and that any fines imposed by securities regulators on SAC Capital will be covered by the manager and not investors.
Still, the Feb. 14 redemption deadline coincides with a rash of media stories, including a report by Reuters, that federal authorities are close to making a decision on whether to charge Michael Steinberg, once a top portfolio manager at SAC Capital, in the insider trading investigation. A lawyer for Steinberg has said his client did nothing wrong.
The move by federal authorities to ratchet up the pressure on SAC Capital and the crescendo of media coverage of the insider trading investigation is taking a toll on some employees. One person who works at SAC Capital said the majority of the firm's 900 employees are going about their jobs and not looking to leave. This person said some of the media coverage has been based on "speculation."
For his part, Cohen is said to be taking the news stories about the investigation in stride, said a former SAC Capital employee who knows the billionaire trader.