Billionaire investor Steven A. Cohen’s SAC Capital Advisors is ending its life as a hedge fund with a 20.1-per-cent gain this year, marking one of the industry’s best returns even after SAC pleaded guilty to insider trading charges, a source familiar with the numbers said.
Cohen reported the number to outside investors on Monday as he prepares to stop managing money for wealthy clients after his firm last month agreed to plead guilty to insider trading and pay a $1.2-billion (U.S.) penalty. One of the conditions of the plea agreement is that Cohen must wind down the business of managing money for outside investors.
The fund said it gained a net 1.88 per cent between Dec. 1 and Dec. 27, the source said.
A spokesman for the fund declined to comment.
The number, although not final for the year because it does not include returns made on the last two days of the year, puts SAC among the $2.5-trillion hedge fund industry’s best performers for 2013.
While the Standard & Poor’s 500 Index has gained 29 per cent this year, the average fund rose only 6.52 per cent, according to data from Hedge Fund Research.
The returns, possibly the last that outside investors with Cohen will see, are sure to mark a high point in an otherwise tough year for SAC. The $1.2-billion fine SAC will pay is in addition to a $616-million settlement the firm reached earlier in the year with the U.S. Securities and Exchange Commission.
Cohen, 57, himself has never been accused of criminal wrongdoing. He does face charges of failing to properly supervise his employees in a civil case brought by the Securities and Exchange Commission.
As SAC, which managed $14-billion on July 1, prepares to become a so-called family office that will manage only Cohen’s personal fortune estimated at $9-billion, it has also shed personnel and its reinsurance unit. A handful of traders from its now-shut London office have moved to rival BlueCrest.
Earlier this month SAC agreed to sell SAC Re, the year-old reinsurance group, to Hamilton Reinsurance Group.
For two decades, Cohen, 57, has delivered some of Wall Street’s best returns with average annual earnings of 30 per cent. While Cohen charged some of the highest fees – including a 50-per-cent performance fee – his gains nonetheless attracted dozens of wealthy investors including the Blackstone Group. But the returns also sparked what has become a years-long government inquiry into exactly how Cohen and his traders managed to deliver such strong returns so consistently.
Earlier this month a federal jury convicted Michael Steinberg, one of Cohen’s top lieutenants, of insider trading, extending the U.S. government’s winning streak to convictions of 77 people and no trial losses.
The trial of Mathew Martoma, another former SAC portfolio manager charged with having relied on inside information to make $276-million in illegal profits, begins with jury selection on Jan. 6.