NEW YORK Steven A. Cohen's SAC Capital Advisors will shut its London office by the end of the year as the hedge fund downsizes in response to a long-running insider trading investigation, according to a memo sent to staff on Tuesday.
In the memo, SAC President Tom Conheeney, who informed the London staff of the decision in person on Tuesday, also told employees that the hedge fund cut six portfolio managers based in the United States this week.
"As our negotiations with the government have unfolded, it has become clear to us that the outcome the government is demanding is likely to have a greater than first anticipated impact on the firm," Conheeney wrote in the memo, a copy of which was obtained by Reuters. "We have concluded that we must operate as a simpler firm and reduce our capital allocations."
He said the decision to close the office "was not something we had been contemplating."
An SAC official declined comment on the contents of memo. The size of the London staff was not disclosed.
The pending London closure was first reported by Bloomberg.
This summer, U.S. prosecutors indicted Cohen's firm, saying SAC fostered a culture in which employees flouted the law and were encouraged to tap their personal networks of contacts for inside information about publicly traded companies.
SAC is close to reaching a deal with U.S prosecutors to resolve the insider trading case against it, Reuters reported last week.
The deal could come within days and would likely involve some admission of liability by the firm and a payment of more than $1 billion. It is not yet clear if Cohen will be banned from managing outside money as part of the settlement.
With investors pulling most of the $5 billion in outside money managed by SAC Capital in recent months, Cohen will not need as large an operation and is looking at becoming a family office sometime this year or next. The firm began the year with about 900 employees.
In addition to recent staff cuts and departures, SAC also let go of a dozen marketing and sales people in recent months.
"We do not anticipate any further material changes in investment personnel headcount," Conheeney said in Tuesday's memo, adding that employees "have done a great job this year under extraordinarily trying circumstances."
"I don't know another group of professionals who could have done as well as you have under the conditions we have endured during the past two years," he said.
SAC's investments gained about 13 percent through September, more than doubling the average return of hedge funds over that period.
The closing of satellite offices, such as London, is to be expected as SAC converts to a firm that only manages Cohen's own roughly $9 billion fortune, said one headhunter who declined to be named due to ongoing work with hedge funds.
Earlier this year SAC shuttered a small office in Chicago. SAC still maintains offices in New York, Hong Kong, Singapore and Boston, in addition to its headquarters in Stamford, Connecticut.
SAC is also in discussions to sell its reinsurance business, and Cohen himself is looking for buyers for all or part of his more than $30 million equity stake in privately held Kadmon Pharmaceuticals.
(Reporting by Katya Wachtel; Editing by Jeffrey Benkoe and Leslie Adler)