Stevie, SAC and that ticking redemption clock
By Matthew Goldstein and Svea Herbst-Bayliss
The WSJ is out today with a big story saying Stevie Cohen and SAC Capital are bracing for up to $1 billion in redemptions, or roughly 16 percent of the $6.3 billion it manages for outside investors. Thatâ€™s a lot of money but sources are telling us redemptions will likely come in lower than thatâ€”think more in the $500 million range.
And more important, no matter what the figure is, donâ€™t look for it to put much crimp in Cohenâ€™s operation.
The deadline for submitting redemptions is Feb. 15, so there is still plenty of time for outside investors make a decision about sticking around or leaving. And even if an investor puts in a redemption notice now, those requests to withdraw money can get pulled at the last minute if the investor has a change of heart.
So far, the most notable redemption request comes from Titan Advisors, the investment fund run by George Fox, a friend of Cohen. Titan, as we noted has been pulling money from big funds for a while, so the decision may be motivated as much by the latest headlines in the insider trading investigation as much as a strategic shift by the investment firm.
Titan, which had been with Cohen for many years, is believed to have had between $75 million and $150 million with SAC Capital, sources say. Â Titan hasnâ€™t yet sent investorsÂ a year end letter formally explaining its rationale for bailing on SAC Capital.
Several people we spoke to say as long as SAC Capitalâ€™s biggest outside investor, Blackstone Group, continues to stand behind the billionaire hedge fund manager, total redemptions will likely come in well below that $1 billion figure. Blackstone has $550 million with SAC Capital and it too has been with Cohenâ€™s firm for years. Up until now, Blackstone has told its investors it sees no reason to redeem from SAC Capital.
An SAC Capital spokesman said: â€śIt is far too early to speculate about redemptions and we do not expect redemptions to have a significant impact on our funds.â€ť
One investor with SAC Capital said as long as Cohen sticks with his plan of indemnifying investors against fines and restitution claims, heâ€™s more than happy to reap the benefits of the 12.1 percent return Cohenâ€™s fund generated last year, after taking out fees. And, as everyone knows, those fees are amongst the heftiest in the $2 trillion hedge fund industry.
The investor points out that SAC Capital on a gross basis before fees, generated close to a 27 percent return. And when you consider that roughly $8 billion of the money managed by SAC Capital is Cohenâ€™s own money, that means he made close to $2 billion. (Remember, Cohen doesnâ€™t charge himself a fee).
In fact, as we previously mentioned on UF, thatâ€™s a big reason why Cohen has no incentive to avoid the spotlight, give back all of that investor money and become a family office. The economics of becoming a family office donâ€™t make sense for Cohen because with his â€ś3 and 50â€ť fee structure–3 % asset fee and 50 % incentive feeâ€”his investors are supporting his overhead and effectively let him pay others to manage his money.
Itâ€™s all something to consider as the headlines about potential SAC Capital redemptions roll in over the next few weeks.