One redemption does not make a trend, but Steve Cohen will
be hoping that investors in SAC Capital are not beginning to
suffer from headline fatigue.
At least one well known investor in hedge funds has
confirmed to InstitutionalInvestor.com that he has requested to
redeem his investment in SAC in light of recent reports of
probes into the Greenwich, Connecticut-based firm.
The investor, who requested anonymity, does emphasize that
SAC has the number one compliance department in the
industry. Nonetheless, recent reports swirling around the
firm have led him to request to pull out his clients
We dont want to be fickle, says the
manager. We hate doing this. But, the government seems so
intent now in getting them and there are additional SAC-related
characters tainted. Some dealt with the same stocks at
Earlier this year, two former SAC portfolio managers
Donald Longueuil and Noah Freemanpleaded guilty to
insider trading charges.
Now according to published reports Iowa Senator
Chuck Grassley has launched an investigation into the trading
activities at SAC. He is said to be looking at 20 trades
previously examined by The Financial Industry Regulatory
Authority (FINRA) as well as other matters dating back to
In addition, prosecutors are said to be investigating SAC
accounts tied to Longueuil and Freeman.
Over the years, investors in SAC have dismissed allegations and
rumors related to SAC as a witch hunt against one of the most
successful investors of all-time and deemed them to be not
credible. And although the investors have no evidenceor
reason to believecurrent allegations are true, it does
appear they are starting to get nervous.
I dont blame them [for redeeming], says a
hedge fund manager who does not have money with SAC. This
is a hot topic.
But, again, one firm redeeming does not make a trend.
And a big portion of SACs nearly $14 billion in assets is
internal money, which obviously is not leaving. Also, sources
say the firm has brought in about $1.5 billion in new money
since mid-2000 while very little left the firm.
They will probably get redemptions, says another
SAC investor. But, we will sit tight until there is a
real reason to do anything. It is all noise.
To their credit, in recent months hedge fund investors in
general have displayed a new concern for, and reluctance to
invest with, firms that have been the focus of government
Just last week, FrontPoint Partners announced it would shut
down most of its funds by the end of the month after
acknowledging it had received a rash of redemptions from
The firm has had to defend its reputation since late last year
when published leaks linked portfolio manager Joseph Skowron to
the arrest of a French doctor who was accused of disclosing
insider information about a clinical drug trial. Frontpoint put
Skowron on leave and got rid of his entire health care team.
Alas, in April the government arrested and charged him with
Late last year, two other hedge funds Level Global
Investors and Loch Capital closed down after they were
raided by federal agents investigating the widening insider
trading scandal on Wall Street.
In February, it was reported a third hedge fund firm raided
Diamondback Capital Management LLC received
redemption requests equaling nearly 10 percent of its capital.
Last week, Bloomberg reported that former Diamondback portfolio
manager Anthony Scolaro, pleaded guilty to insider-trading
charges back in November, citing a plea agreement unsealed
earlier this month in Manhattan federal court.
In the end, SAC investors think the current probes
especially the one by a seeming opportunistic Grassley
will actually help SAC if no wrongdoing turns up. It might just
be that regulatory seal of approval it has long craved