* 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 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
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 exceeds Cohen's
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 let four teams of portfolio managers and analysts go.
A person close to SAC Capital characterized the layoffs as
part of the normal year-end performance review process at the
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
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
HSBC, which as of September 2012 had an investment
in SAC Capital through a fund of fund unit, declined to comment
on whether it would remain or 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
has 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
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."
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 Cohen has done nothing wrong
and that any fines imposed by securities regulators against 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 investigation. A lawyer for Steinberg has said
his client did nothing wrong.
With any redemptions, the money will not leave all at once,
but will be returned to investors over the next four quarters.
In other words, if redemptions reach $1 billion, the hedge fund
will return $250 million by the end of the first quarter.