SAC may cut staff, offices as probe pushes investors away

Mon Jun 3, 2013 7:15pm EDT
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By Svea Herbst-Bayliss and Katya Wachtel

BOSTON/NEW YORK (Reuters) - Steven A. Cohen's embattled hedge fund SAC Capital Advisors is facing a much tougher and less glamorous future, as outside investors pull the bulk of their money from the firm in the wake of an ongoing insider trading probe.

The billionaire trader, who founded SAC in 1992, will have to consider shedding staff, shuttering offices and scaling back some of its trading - something that could cost Wall Street firms hundreds of millions of dollars a year in trading commissions, industry experts said.

An SAC Capital spokesman declined to comment except to confirm that at the moment the firm's assets under management remain about $15 billion.

"There are going to be a lot of tough choices for Steve Cohen to make if he loses the bulk of his outside money, and one of them is probably going to involve trimming his staff," said Daryl Jones, director of research at Hedgeye Risk Management, which lists SAC as one of its clients.

The difficult decisions facing the 56-year-old manager come as outside investors were expected on Monday to redeem between $3 billion and $4 billion from the firm, on top of the $1.7 billion investors asked to get back in the first quarter. The flood of money moving out of SAC Capital comes as the insider trading investigation, now in its sixth year, continues to ensnare more people who once worked for the firm.

And while SAC Capital will continue to manage as much as $8 billion of Cohen's own personal fortune after outside investors are paid back by year's end, industry insiders say it's clear he will not need as big an operation as he once had.

The chief executive officer of an investment fund that invests with many hedge funds said it's likely that Cohen will look to shed much of the firm's "support and ancillary staff." The executive declined to be named.

One area where Cohen could easily cut is marketing and business development, which combined employ about three dozen people, according to firm documents. Other cuts at his 950-employee firm also could come from the finance and accounting departments, which employ 130 people.   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