SAC Capital's cloudy future
In some ways, it's a wonder that SAC Capital is still alive.
The legal problems that it is now suffering would have decimated just about every other hedge fund firm. But SAC Capital is not just another hedge fund firm. It has generated among the best long-term track records, enough that it can charge a phenomenal 3 and 30.
The media was rife with stories last week that the firm is bracing for redemptions of up to $1 billion (out of a total of $14 billion AUM). The fund has a quarterly redemption deadline, with the next one coming up February 15. You can bet some very interesting discussions are going on at investment committees and at the trustee level.
On one hand, you don't want to be associated with such controversy, but on the other hand, the past returns are hard to turn your back on. My sense is that we'll see a gradual chipping away over the next year or two. It will accelerate if Blackstone decides to throw in the towel. While the company and founder Steven Cohen will likely evade insider trading charges there are other possible enforcement actions that could lead to an exodus.
Diamondback Capital shut down recently in the face of enforcement and investigatory woes that resulted in redemptions worth about 25 percent of its assets under management. If redemptions were to hit 25 percent, it may prompt Cohen to take a long, hard look at his firm. For now, the fund firm is battling hard. In addition to investors, it has to keel employees in the truck. It recently hiked performance bonuses by three percentage points.
- here's a FOX article