WSJ article...."SAC Is Bracing for Big Exodus of Funds"
Is there anyone who can speak on the validity of this?
I saw a comment on bbrg, "It’s “premature” to speculate about redemptions, SAC spokesman sd yday"...
SAC manages around 14 bill, 6 of which is outside money.....still going to be a large fund even with 100% outside redemption's
Wouldn't surprise me. With all the DOJ shit going on, nobody wants to be the last one out turning out the lights.
Legal proceedings a no-gate clause in most contracts? If not, how fking ballsy would it be for Stevie to throw te gatez up?
Would not be surprising at all.
That insider trading article with "Portfolio Manager A", was probably a big kick in the balls.
You'll continue to see volatility out there, having a clean resume and clean profile in general is a great way to make sure you stay in the game long-term my friend.
I think Cohen gets through this on the other end. That is not an endorsement of SAC or a judgment on whether or not insider trading goes on there. I've read the SEC's legal filing and talked to former employees, but I'm sure thats not even the tip of the iceberg.
Everybody makes a big deal of how he charges 3/50. Yes, it is patently absurd and generates a huge amount of fees. The $8bn of his own money in the fund is a much bigger driver for him. If SAC is up 15% that is a $1.2bn year for him. The fees on the other $6bn are 180mm in mgmt and $450 in incentive fees. Lets say the median PM cut was 20% of the fees their funds they generate (from the NYT article and people I've talked to this makes sense). That is another $126mm he has to pay out, plus I am sure there are ridiculous prime brokerage costs, paying all of the back office people, technology costs, legal bills, etc. If fees go down to to 2/20, what he makes running outside money will be a small fraction of what he makes on his own money.
I really don't see why he doesn't go the family office route. I know lots of guys that have made more than enough money in the hedge fund business but keep going because they love it and there is a pride/ego thing about being the best. I'm sure Cohen has a little bit of that, but the fear of jail/losing it all has to trump the need for an incremental billion dollars every year. Once rates normalize he'll make 300-400mm a year on fixed income, I'm sure that would support his current lifestyle.
The whole thing makes me think of the Godfather Part II when the Senate was geeked out to get Michael. Well, just think of Matt Martoma has Frank Pentangelli. SAC is covering his bills, he hasn't turned yet, and I am guessing there is a bank account somewhere offshore that will get several million dollars a year as long as he remains silent.
Tom Hagen: When a plot against the Emperor failed... the plotters were always given a chance... to let their families keep their fortunes. Right? Frank Pentangeli: Yeah, but only the rich guys, Tom. The little guys got knocked off and all their estates went to the Emperors. Unless they went home and killed themselves, then nothing happened. And the families... the families were taken care of. Tom Hagen: That was a good break. A nice deal. Frank Pentangeli: Yeah... They went home... and sat in a hot bath... opened up their veins... and bled to death... and sometimes they had a little party before they did it.
Very well said sir. I especially love the Godfather reference, my favorite movie series by far. Kudos and SB for you.
Grey Fox, I really liked your post, especially because the Godfather is such an amazing series. I'm tempted to re-watch the movies this weekend. That said, I disagree with your view that Stevie will make it through this mess. Your argument mostly focused on why SAC should become a family office, and not around why you thought Stevie would make it out alright. The driver of my view is pretty simple, I think the SEC is on a witch hunt, and they will stop at nothing. It's like when they were going after the mob. If the government wants to bring you down, and you have any hint of guilt, that dirt will be found. I'm not taking a view on whether Stevie was a knowing insider trader or not. However, it seems clear that some of his employees were, and they fed up those ideas into the "big book". I will note that most of the people in the industry believe that Stevie was an insider trader. I also believe that insider trading is a crime with many shades of gray, and there is significant ambiguity on what constitutes an insider trade. While this ambiguity generally favors the accused, given the extent of the SEC's desire to convict Stevie, I believe that in this case it is a negative.
In terms of LPs, while there may be some reputational concerns, there are no real risks for them. Basically they capture the upside if Stevie continues to crush it, and share none of the downside. Perhaps if things go down in flames all of a sudden, people will pick off their positions, but it seems more likely that any movement would be gradual.
There are also a few other factors that warrant discussion. One is that SAC is a massive shop with a lot of bodies that may need to find a new job. I have quietly heard that several firms will not hire former SAC employees because of reputational risks. Where are all these people going to go? I would like to imagine that the vast majority are not insider traders, but just your typical hardworking and sharp elbowed hedge fund types. I know some really good guys there. Another is I would imagine that given its scale, SAC is a contributor to equity market efficiency, particularly in the short term (such as narrowing opportunities to trade on consensus numbers that are off). I bet if SAC runs into trouble, the next year short-term platform shops like Citadel GE/Millennium/Alyeska/etc will have big years.
The situation here is obviously fluid and none of my views are set in stone. Really curious to hear what other people think.
I don't see how going the family office route will help him. The trades in question occurred in the past and his liability for them does not change if he decides to return outside money. Of course, things may be easier on a day to day basis because he does not to worry about outside investors. But this is hardly his biggest problem now.
I'm not saying the family office route will make his legal troubles go away. I'm saying Matt Martoma not turning, hundreds of millions in legal fees, etc will allow him to barely scrape through this mess. Once he gets through it, the family office route makes way more sense.
Minus fuga quasi porro. Rem quisquam earum et qui quis porro dolorum ut. Aut ut dolores et dignissimos. Asperiores sunt iure sed possimus qui minima. Id excepturi magnam consequatur officia neque. Illum velit eos eius.
Ea quia ut aspernatur deserunt. Voluptas pariatur unde qui ut voluptatem rem. Voluptatem maiores possimus omnis facere nobis.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...