Steven A Cohen, the once-secretive billionaire hedge fund manager, is suddenly everywhere.
On Monday, Cohen and his wife attended the Metropolitan Museum of Art’s annual Costume Institute gala, where they rubbed elbows with the rock star Mick Jagger and the quarterback Tom Brady. On Wednesday, he is scheduled to speak, before former President George W Bush, at a prominent hedge fund conference in Las Vegas. Earlier this year, he made his first trip to Davos, Switzerland, for the World Economic Forum, where he could be seen dancing the night away at a private party.
And Cohen is bidding to buy a large stake in the New York Mets from the team’s owners.
Behind the scenes, life has not been nearly so fun.
Federal prosecutors are examining trades made in an account run by Cohen at SAC Capital Advisors, his hedge fund in Stamford, Conn, that manages about $12 billion, according to a government filing. The trades were suggested by two SAC portfolio managers who have pleaded guilty to insider trading-related crimes. The charges are part of a vast investigation into insider trading at hedge funds by the United States attorney in Manhattan that has resulted in criminal cases against at least 47 people over the last two years.
Meanwhile, Senator Charles E Grassley, Republican of Iowa, asked the Financial Industry Regulatory Authority in a letter on April 26 to provide information on “potential scope of suspicious trading activity” at SAC.
For years, Cohen’s firm has been beset by persistent whispers of a cowboy culture that often walked up to the line, if not over it, while generating stupefying returns, minting scores of millionaire traders and making Cohen a billionaire many times over.
Earlier this year, those whispers became louder when one of the SAC portfolio managers, Noah Freeman, admitted trading on illegal tips about publicly traded companies while working for Cohen and agreed to cooperate with the government’s investigation, leading to questions about whether Cohen himself and the firm could become ensnared.
Rick Maiman/Bloomberg News Donald Longueuil, a former portfolio manager at SAC Capital, who pleaded to insider trading charges.
The other SAC portfolio manager, Donald Longueuil, pleaded guilty last week.
“The striking thing about SAC has always been its extraordinary performance in the absence of any identifiable special sauce,” said Sebastian Mallaby, the author of “More Money Than God,” a book published last year on the history of hedge funds. “Charges like these cast doubt on the legitimacy of the fund’s investment process.”
Neither SAC nor Cohen has been accused of any criminal wrongdoing and the firm is cooperating with the government’s investigation. The government’s interest in Cohen’s trades was reported earlier by The Wall Street Journal.
Unlike many hedge funds that are controlled by one portfolio manager who makes all the investment decisions, SAC is decentralised; 142 small teams are each given control over hundred of millions of dollars to invest. Cohen attracts talented, ambitious traders because he offers to pay each team as if they run their own fund — without having to raise money and run a business.
“He’s giving them a lot of autonomy — that’s the pitch,” said a former employee who asked for anonymity because he did not want to harm his relationship with Cohen. “Do I think the fish stinks at the head of SAC? No. But does the business model make it challenging to keep bad people from doing bad things? Yes.”
The firm’s unusual balkanized structure could ultimately insulate Cohen from any insider trading allegations. Most of the firm’s traders invest on their own with little direct input from Cohen, who manages less than 10 percent of the fund’s capital.
©2011 The New York Times News Service
