SAC hit with $1.68 billion in withdrawals as trading probe deepens

Fri Feb 15, 2013 1:46pm EST
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By Svea Herbst-Bayliss and Jennifer Ablan

NEW YORK (Reuters) - Hedge fund billionaire Steven A. Cohen is feeling the pinch from the federal government's insider trading probe as outside investors in his SAC Capital Advisors submitted a request to withdraw $1.68 billion from the firm by year's end.

The dollar value of investor redemption notices exceeds the $1 billion figure Cohen had been telling the 900 employees at his $14 billion hedge fund to expect. The firm was bracing for withdrawals as the insider trading investigation increasingly focuses on the activities of former employees of Cohen's fund.

But the figure likely will not impede SAC Capital's operation in the near term, since those dollars will be returned over the course of year. And roughly 60 percent of the money managed by Cohen's firm is either his or his employees'.

A representative for one of Cohen's outside investors said even if all of the roughly $6 billion in outside money was withdrawn from SAC Capital, the hedge fund would still be able to operate but would likely be smaller.

An employee of SAC Capital who did not want to be identified said, "SAC could handily cover all costs for operation," in the unlikely event all the outside money was withdrawn.

A person familiar with the firm said the firm's trading profits will help offset losses from the $1.68 billion investors are redeeming.

The deadline for outside investors to put in notices was Thursday night.

SAC's biggest outside investor, Blackstone Group (BX.N: Quote), is keeping most of its $550 million with the firm. The asset management arm of the private equity firm decided to stay with Cohen's firm after negotiating more flexible redemption terms on behalf of all of the firm's investors.   Continued...

Hedge fund manager Steven A. Cohen, founder and chairman of SAC Capital Advisors, responds to a question during a one-on-one interview session at the SkyBridge Alternatives (SALT) Conference in Las Vegas, Nevada May 11, 2011. REUTERS/Steve Marcus