Bloomberg News

Cohen’s SAC Tops Most Profitable List Amid Insider Probes

January 03, 2013

Steven A. Cohen, founder, SAC Capital Advisors

Cohen's Capital International fund was the world's most profitable hedge fund, even though it returned a modest 10 percent. Photographer: Scott Eells/Bloomberg

While Steve Cohen has been in the news lately because of former and current employees’ alleged involvement in insider trading, the hedge-fund manager has continued to do what he does best: make money.

SAC Capital International, Cohen’s flagship fund, was the world’s most-profitable hedge fund in the first 10 months of 2012, earning $789.5 million for Cohen, 56, and his managers, according to Bloomberg Markets’ annual ranking of hedge funds, which will appear in the February issue of the magazine.

More from the February 2013 issue of Bloomberg Markets:

  • Narula's No. 1 Hedge Fund Gains 38% Betting on Mortgages
  • The 100 Top-Performing Large Hedge Funds
  • Slideshow: Who Made the Top 20?

SAC Capital International is No. 1 not because of performance; it ties for No. 86 on that measure, with a 10 percent return in the Markets ranking of the 100 top-performing funds. Rather, the fund earned the most money because Cohen charges some of the highest fees on Wall Street. While most funds impose a 1 to 2 percent management fee and then take 15 to 20 percent of the profits, Cohen levies 3 percent and as much as 50 percent, according to investors.

The fund manager, who’s largely an equities investor, has produced an average annual return of 30 percent since starting his firm two decades ago. He’s had just one money-losing year, 2008, when the flagship fund tumbled 19 percent. For calendar 2011, he and his managers shared $907 million. SAC Capital International has been closed to new investors since August 2011.

In November, Cohen was for the first time directly linked to a case of insider trading after Mathew Martoma, a former SAC portfolio manager, was arrested.

Record Setter

Martoma, who worked at an SAC unit called CR Intrinsic Investors LLP from 2006 to 2010, was charged in what U.S. prosecutors call a record-setting insider-trading scheme that netted as much as $276 million in profits and averted losses for SAC Capital Advisors LP.

The following week, SAC told investors on a conference call that it had been served with a Wells notice, a warning that the U.S. Securities and Exchange Commission is considering filing a civil claim.

Neither Cohen nor SAC has been accused of wrongdoing. Jonathan Gasthalter, a spokesman for SAC, issued a statement saying: “Mr. Cohen and SAC are confident they have acted appropriately and will continue to cooperate with the government’s inquiry.”

SAC President Tom Conheeney told investors on the conference call that Cohen was deposed in the civil case that the SEC brought against Martoma. The case involves tests of a drug designed to treat Alzheimer’s disease that was being developed four years ago by Dublin-based Elan Corp. (ELN:US) and Madison, New Jersey-based Wyeth, now a unit of Pfizer Inc. (PFE:US)

20-Minute Call

Prosecutors say that Martoma solicited information from a doctor helping conduct clinical tests on the drug. When he learned that the tests were going badly, Martoma had a 20-minute phone call with Cohen, prosecutors say, after which SAC sold its positions in Elan and Wyeth and then bet against the companies.

SAC and Cohen were sued Dec. 21 by a group of Elan investors who claimed losses as a result of the alleged illegal insider trading in the drug maker’s stock.

SAC was first linked to the government’s insider-trading investigation in 2009, when former SAC Capital employee Richard Choo-Beng Lee was charged with insider trading at another firm. Six former or current SAC employees have been tied to insider trading while working at SAC; three have pleaded guilty.

To contact the reporter on this story: Kelly Bit in New York at kbit@bloomberg.net

To contact the editors responsible for this story: Michael Serrill at mserrill@bloomberg.net; Christian Baumgaertel at cbaumgaertel@bloomberg.net


Burger King's Young Buns
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

Companies Mentioned

  • PFE
    (Pfizer Inc)
    • $29.26 USD
    • -0.47
    • -1.61%
Market data is delayed at least 15 minutes.
 
blog comments powered by Disqus