* 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 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
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
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
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
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.