Lawrence Delevingne of Hedge Fund Intelligence doesn’t believe that the recent indictment of former SAC Capital Advisors Mathew Martoma for insider trading, which reportedly might lead to SEC charges against the firm and CEO Steve Cohen, will cause investors to flee the hedge fund.
History tells him that SAC investors aren’t fazed about these types of allegations.
Since 2010, the company’s assets jumped from $12 billion to $14 billion “despite six people being tied to insider trading while working at SAC and three of them pleading guilty.” All increases in assets took place before 2012, when the firm stopped accepting new capital.
Delevingne collects quotes from AR Magazine’s “Inside SAC’s shark tank,” published shortly after the allegations, which demonstrate the bearish sentiment on SAC that never materialised in the marketplace:
“If I were sitting on the sidelines and considering an allocation, I would want to wait until the SEC has handed down their all-clear notice on the firm,” said one institutional investor familiar with SAC in the story.
Added the chief investment officer for one prominent institution: “There’s zero chance in my mind that SAC can go out and father a significant amount of institutional investor money,” the person said. “If you’re a plan sponsor, you’re making zero dollars. So you say to yourself, “I’m not making enough money to take this kind of career risk?”
One fund of funds manager quoted in the 2010 story took an even harsher view. “The funds of funds know that if anyone at SAC actually gets charged, and anyone gets indicted, that the whole thing could go down in about a week–just like Galleon,” the person said.
SAC’s past resiliency to legal assaults may help it avoid an outflow of funds. However, as the New York Times notes, things might be different because “this is the first time the government has linked Mr. Cohen to questionable trades.”
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