Another day, another report of an SAC-Steve Cohen probe.
If I were an investor in the fund, this would begin to wear on me. Especially if I were a fiduciary and investing on behalf of others.
You just know the sharks—aka plaintiff bar—are salivating, waiting for that SEC or DOJ announcement of some sort of civil or criminal action. Then, within 3.2 seconds there will most likely be a lawsuit filed on behalf of some harmed investor who had “no idea” any wrongdoing was taking place.
Which is the reason I am surprised that many investors in SAC are hanging in there . Investment advisors, funds of funds, have to know that their clients will be in their face if there are any charges, even though all along they are still counting their winnings from Cohen’s continued strong gains.
I am not saying Cohen or the firm has done anything wrong. I am in no position to know. And everyone I speak with tells me Cohen has the best internal compliance of anyone in hedge fund-dom. I can’t dispute that.
And as one SAC investor tells me, it is very telling that when the Feds raided a number of hedge funds—including Level Global—which was founded by former SAC traders—SAC itself was not raided. This means the government was not afraid SAC would destroy critical documents.
However, this multi-front assault on SAC—from the SEC, DOJ, FINRA, Senator Grassley—looks and feels like those probing SAC feel some sort of wrongdoing has taken place. They are not sure whether Cohen himself was involved or just rogue traders.
And after botching the Madoff investigation, the Feds will be very reluctant to terminate a probe and give Cohen the Good Federal Government Seal of Approval.
It almost feels like a murder investigation where the target is highly suspected of wrongdoing but the investigators are waiting for the body to wash ashore.
Meanwhile, Cohen soldiers on. He is said to have been up less than 1 percent in May, which was not as good as the overall market. But, he is up between 8 percent and 9 percent for the year, which is respectable, especially for a macro guy, given that a number of his peers are losing money so far this year.
This, ultimately, is why it is hard to bail out on this guy.
