* Feb. 14 deadline for investors to withdraw money
* Blackstone to keep most of its investment for time being
* 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
following 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.
Blackstone Group LP, one of Cohen's largest outside
investors with roughly $550 million invested, said it will keep
most of that money in the hedge fund for the time being, after
having "negotiated a special withdrawal right for S.A.C.
investors," spokesman Peter Rose said.
"Under this special withdrawal right, has
negotiated the ability to delay its redemption decision for
three months. We will use this period of time to evaluate all
additional information which becomes available," he said.
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 -
meaning investors who redeem next quarter will also get all
their money out by the year's end.
A source familiar with the situation said after negotiating
the deal with Blackstone, SAC made the more favorable redemption
terms available to all its investors.
Reuters earlier reported that Blackstone was seen as
sticking with Cohen's fund.
Blackstone, best known as a private equity firm, also
manages one of the largest hedge fund investment businesses with
$46.1 billion in assets.
While Blackstone stays put, Titan Advisors, Citigroup's
private bank and Lyxor Asset Management have announced
they want to withdraw money from SAC 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 years.
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 funds unit, declined to
comment. Morgan Stanley, which is invested in SAC through
a fund of funds unit, declined to comment on SAC through a
spokesman. Ironwood Funds, which has money with SAC Capital also
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.