Photo: New York magazine
SAC Capital has told its employees and advisors to brace themselves for a mass exodus of investor capital in the coming months, the WSJ reports.Withdrawals could equal $1 billion, or 17% of outside investor funds, and clients have until February 15th to request a redemption if they want their money back by the end of Q1.
According to Bloomberg, SAC was the most profitable large hedge fund in the world in 2012, so the question is not the success of its investments. Rather, investors have becomes skittish because the firm has come under the intense scrutiny of regulators for its links to multiple insider trading scandals over the last several years.
SAC founder Steve Cohen himself was said by federal prosecutors to have interacted with alleged inside trader Mathew Martoma. Martoma was a fund manager at a SAC Capital subsidiary fund, and is accused of helming the most profitable insider trading scheme of all time.
$1 billion is a considerable mount for a firm like SAC. In total, it manages $14 billion, $6 billion of which comes from outside investors.
“It is premature to speculate about redemptions,” an SAC spokesman said Thursday. “Investors have until next month to decide.”
Even if investors demand all their money back from SAC, they will only be able to collect their funds 25% at a time, every three months starting in March, people familiar with SAC’s rules said. The staggered withdrawals mean that SAC expects at least $250 million to be withdrawn at the end of March.
There have already been signs that investors are willing to flee despite SAC’s record of 30% annualized returns since its inception in 1992.
At the end of last year, Societe Generale’s Lyxor Asset Management arm (with $113 billion assets under management) announced that it would take its money out of SAC. Titan Advisors, a wealth managements firm whose co-founder has been investing with SAC since its early days, also announced that it withdrawal.
Yesterday the WSJ reported that Citigroup had advised its pension plans to file redemption requests with SAC.
And things are getting darker. This week Bloomberg reported that Wesley Wang, a former SAC Capital analyst, was naming names left and right. Yesterday in Court, the NY Post reports, Wang was sentenced to two years in prison without a fine.
Sounds like the Feds were happy with him.