Getty ImagesYesterday was the deadline for investors to redeem their money from embattled Stamford, Connecticut-based hedge fund SAC Capital as the government’s insider trading investigation intensifies.
According to Bloomberg News, the fund could now be left with less than $1 billion in outsider money.
It was estimated investors would request to pull out $3.5 billion in addition to the $1.7 billion that was marked in the first quarter for redemptions.
SAC manages about $15 billion. Of that, $9 billion belongs to founder Steve Cohen and employees and the rest is outsider money.
Those outside investor redemptions are a big deal and not just to SAC.
The New York Times’ Peter Lattman explains why Wall Street would be freaking out:
But a major reason for the intense interest on Wall Street, senior brokerage firm officials say, is a commercial one: SAC has generated billions of dollars in revenues for brokerage firms over the years. Several executives — all citing client confidentiality — said that the prospect of a severely diminished SAC would hurt their bottom line, which has created fear and anxiety on trading desks across Wall Street.
“This is going to have a significant impact to the Street, full stop,” said a senior executive at a brokerage firm that counts SAC as one of its largest clients…
The brokerage business relies on trading volume. Brokers earn commission for each share traded. For example, a broker could make anywhere from half a penny per share or five cents a share.
A hedge fund behemoth like SAC Capital is a huge player. Back in 2006, the Wall Street Journal reported that SAC’s trading accounted for 2% of all of the stock market activity.
It’s easy to see how they would be a desired client on the Street.
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