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The Morning Brief: SAC Reportedly Close to $1 Billion-Plus Settlement

Steve Cohen’s SAC Capital Advisors and the government have “agreed in principle” to a settlement over criminal charges related to alleged insider trading, according to the Wall Street Journal. The Stamford, Connecticut hedge fund has agreed to pay a penalty ranging between $1.2 billion and $1.4 billion, which would be the largest ever for an insider-trading case, according to the report, which cited people familiar with the matter. Altogether, the SAC will wind up paying nearly $2 billion in fines, including the $616 million it has already agreed to pay the Securities and Exchange Commission in a civil settlement.

London-based Egerton Capital is the latest hedge fund firm to close to new investors. The firm, headed by John Armitage, closed its long-only fund in September and stopping accepting new money for its long-short hedge fund late last year. Egerton currently manages $11.4 billion, up from just $6.3 billion one year ago.

Hedge funds are shelling out hefty sums for compliance. The average small fund is spending $700,000, medium-size fund managers are spending $6 million while large fund managers are spending $14 million, according to a new report produced by KPMG International, the Alternative Investment Management Association (AIMA) and the Managed Funds Association (MFA). Altogether, the hedge fund industry has spent more than $3 billion on compliance costs to meet new global regulations. Looked at a different way, hedge fund managers on average are spending between 5 percent and 10 percent of their operating costs on compliance technology, headcount and strategy. Most managers are absorbing these costs rather than passing them on to the funds.

Another hedge fund data collector has weighed in with its estimate of the total assets in the industry. According to eVestment, there was a little more than $2.69 trillion dollars in hedge fund assets as of the end of August. This includes a net increase of $21.45 billion in August alone.

Shares of Google surged between 5 percent and 6 percent in after-hours trading after the search engine giant reported third-quarter results that beat consensus forecasts. The stock had closed about 1 percent in the regular trading session.

Shares of Chipotle Mexican Grill, a widely-noted short position of David Einhorn’s Greenlight Capital, rose another 3 percent in after-hours trading after the fast food chain reported third-quarter revenues that exceeded expectations even though earnings came in below forecasts. Significantly, same-store sales rose 6.2 percent in the third quarter, far exceeding the 4.7 percent growth forecast by analysts.

Eastman Chemical’s stock rose another 1.46 percent to close at $81.45 on Thursday, its seventh straight higher finish. The company is a position in the portfolio of Barry Rosenstein’s activist firm Jana Partners and may or may not be its next activist target.

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