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 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’ money.

“We don’t 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 SAC.”

Earlier this year, two former SAC portfolio managers — Donald Longueuil and Noah Freeman—pleaded 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 January 2000.

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 evidence—or reason to believe—current allegations are true, it does appear they are starting to get nervous.

“I don’t 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 SAC’s 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 investigations.

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 investors.

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 insider-trading.
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 for.