Rival hedge funds hope to feast on SAC Capital redemptions

Wed Jun 12, 2013 5:31pm EDT
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By Svea Herbst-Bayliss and Katya Wachtel

BOSTON/NEW YORK (Reuters) - A long list of rival hedge funds is eager to tap the billions in outside money that Steven A. Cohen's SAC Capital Advisors is expected to return to investors by year-end.

Large hedge-fund firms structured like SAC, where Cohen allocates capital to dozens of portfolio teams that trade mainly in stocks, stand to benefit most from the ongoing insider trading probe, hedge fund industry investors and analysts said in a series of interviews. (Most did not want to be identified because of running or investing in funds that compete with SAC or have done business with it.)

Israel Englander's $18 billion Millennium Management, which has long had a rivalry with SAC, is the name that comes up most often as a possible alternative investment, the industry sources said. The firm also relies on a group approach where dozens of smaller portfolio teams, rather than one or two main managers, buy and sell securities quickly, often thousands of them.

Balyasny Asset Management, Visium Asset Management and Kenneth Griffin's Citadel, which all feature multi-manager trading teams, have also been named frequently as candidates for some of the estimated $3 billion to $4 billion expected to leave SAC, said industry sources.

Several people mentioned Hutchin Hill, a $1.1 billion firm run by former SAC Capital trader Neil Chriss. The firm employs a strategy similar to Cohen's and is taking money from new investors.

All five firms either declined to comment or did not return requests for comment.

A person who worked for a fund invested with SAC said investors had two options: They could stick with Cohen's trading style and move money to some of his direct competitors or spin-offs. Or they could switch strategies and allocate money to funds that make longer-term and often more-concentrated stock investments.

Industry insiders said there were thousands of possible choices in the $2.25 trillion hedge fund industry. Investors had until June 3 to tell SAC whether they wanted to exit the fund, making it one of the mostly hotly watched industry deadlines in recent memory.   Continued...

An exterior view of the headquarters of SAC Capital Advisors, L.P. in Stamford, Connecticut, in this picture taken December 13, 2010. REUTERS/Mike Segar