- Billionaire Steve Cohen has amassed at least $US3 billion in capital for his highly anticipated hedge fund launch, which is expected for February.
- The fund is expected to close to new money on March 1.
- About 20 institutions have written checks of $US100 million each.
- The fund will not require a three-year lockup period – a term some investors found onerous.
- The cohead of trading at Cohen’s Point72, Jeff Miller, appears to have left the firm.
It’s about three weeks until Steve Cohen returns to the hedge fund industry, and he has already amassed a substantial war chest.
Cohen was barred from managing other people’s money after an insider-trading scandal. The penalty was lifted this year, and Cohen has already raised at least $US3 billion for the new fund, according to people familiar with the matter.
The fund is expected to open for business next month, and will close its books to new investors in March, three other people said, asking not to be identified. About 20 institutions have agreed to invest in the fund, writing checks of about $US100 million each, one of the people said.
Cohen’s return to the hedge fund business has been highly anticipated for months. He was barred from managing external assets in 2014 after his firm SAC Capital pleaded guilty to insider trading. Cohen was never individually charged with insider trading. His failure, according to the Securities and Exchange Commission, was to supervise those traders as head of SAC Capital.
He has since been running an $US11 billion family office, called Point72 Asset Management, which manages Cohen’s fortune as well as money of some employees. Accepting outside investors’ money again would allow Cohen to offset some of the costs of running the business.
Two people said Jeff Miller, Point72’s cohead of US trading, appears to have left the firm ahead of the launch. An email to Miller was returned as undeliverable, and he has been removed from the company’s internal directory, another person said. Miller couldn’t immediately be reached.
Mark Herr and Jonathan Gasthalter, spokesmen for Point72 and Cohen, declined to comment on Miller’s status at the firm or the fundraising amount. Doug Blagdon, who led marketing Cohen’s launch at ShoreBridge Partners, didn’t respond to an email seeking comment.
Miller started working for Cohen in 2003, according to a Bloomberg profile. His departure would come months after that of Phil Villhauer, another longtime Cohen staffer and former head trader.
One of the potential investors said Cohen’s team had been negotiating terms with investors, and some of those terms are in flux. One term, that investors agree not to withdraw funds for three years, has been scrapped, three people said. Several investors found the lockup of three years, high by standards of the hedge fund industry, onerous.
Raising $US3 billion would make Cohen’s comeback one of the biggest hedge fund launches of recent memory – and it’s in line with what a person close to the matter told us Cohen sought to raise back in October.
Some investors declined the offer to invest, despite having invested with him previously, because they thought Cohen’s business had changed too much, particularly toward quantitative models that can be difficult to understand. Many of SAC’s big moneymakers have also left over the years.
Others say that the fees are too high and that Cohen’s recent performance – which has been lacklustre, save for a recent uptick – raises concerns. Point72 gained 12% last year through November, according to a person who said they had seen the figures.
An aura of mystique
An aura of mystique – and in some cases, paranoia – nonetheless shrouded the high-profile fundraising process since last year. Several investors said they feared blowback if they spoke with the press about the launch.
Cohen’s marketers have been keeping the information outflow to a minimum, conducting private meetings rather than attending Wall Street’s marketing conferences.
“They don’t need to stoop down to that level,” said one investor who was familiar with the pitch.
At the early stages last year, Cohen’s representatives had limited themselves to vague and almost bizarrely hypothetical conversations about the fund along the lines of: If a particular person named Steve Cohen happens to launch a fund, and that fund happens to open next year, what would it take for an investor to sign on?
One person who plans to invest said that they purposefully did not ask for documents detailing the new fund because they did not want to be accused of sharing the details with anyone. The investor said they could get the information they needed by other means and were already sufficiently aware of Cohen’s investment process.
The secrecy is related not just to the discussions but also to the specifics of how the fund will operate.
Investors who have considered the fund said Cohen planned to keep the investor base small.
One investor said they had been told they could not meet with the investment teams that would be responsible for managing the money, and couldn’t get answers on attribution for past performance, such as who the best performing managers had been at Point72. But that is also common among multimanager firms like Citadel, Millennium, and other competing firms.
Pretty much everyone would like to meet with Cohen – it’s standard to meet with a founder, especially when one is writing a big check – but no one was supposed to until this year. That was due to a regulatory restriction on Cohen.
But as several people familiar with the launch put it: If you needed to meet with Cohen to make the decision, you’re not the right kind of investor.