BOSTON Billionaire investor Steven A. Cohen hired a top Silicon Valley data analytics firm to keep closer tabs on his employees just months after his hedge fund SAC Capital Advisors pleaded guilty to insider trading charges.
Palantir Technologies, a "big data" information intelligence firm that has worked for the Federal Bureau of Investigation and the Central Intelligence Agency, will help strengthen the firm's compliance and surveillance teams, SAC President Tom Conheeney wrote to employees on Wednesday.
"We have asked ourselves if there are ways to better detect improper activity and to create a clearer picture of the different types and sources of information that enter the firm," he said in the memo, which was seen by Reuters.
SAC agreed to pay a $1.2 billion penalty and return all money to outside investors as part of a plea to settle criminal insider trading charges. Cohen was not accused of any wrongdoing but the U.S. government brought criminal and civil cases against 10 former SAC employees and said that insider trading was "pervasive" and "rampant" at the hedge fund.
As SAC tries to move forward, with less capital and a tattered reputation, the firm has announced new oversight initiatives plus a name change all with the intention of continuing to invest.
"We have been looking for a technological solution that will help us make sense of the disparate pieces of information we already have, to help us 'connect the dots'," he wrote.
Palantir is coming on board only a few months after SAC Capital Advisors, once one of the world's biggest and most successful hedge funds with $14 billion in assets at the start of 2013, plead guilty to insider trading.
The U.S. government had been investigating the firm for about a decade and unveiled its most recent case last week when the Securities and Exchange Commission brought a civil suit against Ronald Dennis. Dennis agreed to pay $200,000 and be banned from the securities industry to settle the charges.
SAC's guilty plea in November essentially put the hedge fund out of business since the government forced SAC to return all outside clients' capital as part of the deal.
Now the firm is transforming itself into a so-called family office which will manage only Cohen's personal fortune, estimated at $9 billion.
To distance itself from the past, SAC plans to change its name to Point72 Asset Management next month. It will also hire a chief surveillance officer to monitor trading and has consolidated some of its units.
"We will continue to look for other ways we can strengthen our surveillance efforts," Conheeney wrote in Wednesday's memo, adding "The steps I have outlined to you over the past several weeks show we are matching our words with actions."
Cohen first considered hiring Palantir nine months ago when he invited the firm, run by former philosopher Alex Karp and backed by investor Peter Thiel, to "embed" a team in SAC's compliance and technology group, Conheeney wrote.
SAC has also shrunk in size and now employs roughly 850, down from about 1,000 in early 2013. The firm shut down its London office, which prompted a string of employees to move to rival hedge fund BlueCrest, including Lia Forcina, who managed a portfolio of roughly $700 million.
People familiar with the firm speculate that more employees may leave in the coming months. Most recently two managers quit to join Highbridge Capital.
(Reporting by Svea Herbst-Bayliss; Editing by Bernard Orr)