Let’s be perfectly frank about this.
The idea that SAC Capital might have access to information that at least shades the borders of what is legally acceptable under insider trading restrictions is not something that is likely to scare away most of SAC Capital’s investors.
It’s safe to say that at least some of them put there money with SAC because they figure it has an “edge” that at least comes close to the edge of impropriety. The massive $13 billion hedge fund can account for at least 1/3 of all options trading on a given day, and the options market has long thrown up signals of massive insider trading. You couldn’t throw a stone at a hedge fund conference without hitting someone who would tell you that they’ve always suspected SAC may occasionally cross the line.
What makes some SAC investors nervous is not potential trading improprieties. It’s the idea that SAC might get accused of something by the SEC or US prosecutors. Then the investors would have to withdraw their funds and act shocked about the improprieties. And they’d never see Stevie Cohen’s amazing returns again.
We’re confident that when SAC says it has detected no suspicious trading a significant number of investors were relieved not because they think nothing improper occurred. They were relieved because nothing detectably improper occurred.
Of course, this says nothing about what is really going on up in Stamford. Just because some of your investors and outside fund managers think you might be at least a little bit dirty, doesn’t mean you are. And no one has ever produced any incriminating evidence or substantiated allegations against SAC. So we’re inclined to side with Stevie Cohen here. For all we know, SAC is the cleanest hedge fund ever.