S.A.C. Capital Advisors
|Founder(s)||Steven A. Cohen|
|Headquarters||Stamford, Connecticut, United States|
|AUM||$15 billion (2010)|
|Owner(s)||Steven A. Cohen|
S.A.C. Capital Advisors, L.P., (often written as "SAC" but with each letter pronounced separately) was, as of mid-2013, a group of hedge funds founded by Steven A. Cohen in 1992. The firm employed approximately 800 people in 2010 across its offices located in Stamford, Connecticut and New York City, and various international satellite offices, but has reportedly lost many of its traders in the wake of various investigations by the SEC. In 2010, the SEC opened an insider trading investigation of SAC and in 2013 several former employees were indicted by the U.S. Department of Justice. In November 2013, the firm itself pled guilty to insider trading charges and paid $1.2 billion in penalties., although no formal charges have been filed against Mr. Cohen himself. As of early 2014, the firm has shrunk after returning the vast majority of its outside (i.e. not controlled by Steven Cohen personally) investor capital. The limited partnership. SAC Capital Advisors L.P., may close completely, although Steven Cohen will reportedly retain much of the infrastructure in order to manage his vast personal wealth.
The company is incorporated offshore in Anguilla, British West Indies, and its trading offices are located in Stamford, Connecticut and New York City. SAC also maintains satellite offices in San Francisco, Hong Kong, Boston, Shanghai, Tokyo, Sydney, Frankfurt, Rio de Janeiro, and London. The firm employs approximately 1,000 people including 300 investment personnel and 40 employees working in the legal and compliance departments. In 2011 Reuter's characterized SAC as "one of the world's biggest and most successful funds" who attracted wealthy investors despite it having the highest management fees in the industry.
The company was founded in 1992 with $25 million. SAC became the most successful hedge fund with annual returns averaging 25 percent after fees. The company's strategy was the "mosaic theory of investing" which develops investment positions based on stock information from many sources. SAC focused on trading liquid, large cap stocks and later began using fundamental and quantitative strategies. The company had $14 billion in assets[when?] across four independent portfolios. According to Bloomberg BusinessWeek magazine, SAC Capital Advisors daily trading activity accounts for as much as 3% of the New York Stock Exchange's daily trading and up to 1% of the NASDAQ's daily trades. The fund reportedly paid brokers the highest commissions of any equities-focused investment group.
In March 2006, 60 Minutes reported on a lawsuit against SAC filed by Biovail, a Canadian pharmaceutical company who alleged that SAC had manipulated reports on Biovail in order to drive the price of the stock down. SAC denied the charges and said that the stock was overvalued and that the decline was due to earnings shortfalls and regulatory investigations. In August 2009, the New Jersey Superior Court dismissed all of Biovail's claims against SAC Capital. On February 10, 2010, SAC Capital filed a lawsuit in federal court in Connecticut seeking damages from Biovail for filing "vexatious" litigation against SAC in 2006. The lawsuit was settled out of court in November 2010. Under the settlement, Biovail's new owner, Valeant Pharmaceuticals, paid $10 million to SAC.
Fairfax Financial Holdings
In July 2006, SAC Capital Advisors was one of three industry participants that were sued by Fairfax Financial Holdings Ltd (FFH) and accused of conspiring to manipulate the company's stock price. FFH alleged SAC Capital and other two hedge funds paid John Gywnn and his employer Morgan Keegan to publish negative reports on FFH and drive its stock price down. In December 2008, Fairfax Financial Holding provided evidence to the court of email exchanges among the hedge funds and the analyst, John Gywnn, discussing the content of the soon to published report on FFH. In September 2011, the Superior Court in Morris County, New Jersey, granted SAC Capital Advisors’ motion for summary judgment and removed SAC Capital Advisors, Sigma Capital Management, a division of SAC Capital Advisors, and Steven Cohen as defendants from the case. Judge Stephan C. Hansbury wrote in his judgement: “There is no direct evidence of any sort of conspiracy involving SAC to take down Fairfax."
Insider trading cases
A 2013 article in Yahoo! Finance reported that SAC Capital Advisors had been under investigation by the Securities and Exchange Commission (SEC) for six years. In November 2010, the SEC conducted raids at the offices of investment companies run by former SAC traders. Several days later SAC received what they described as "extraordinarily broad" subpoenas . In February 2011, two former employees were charged with insider trading. In November 2012 federal prosecutors levied charges against additional former SAC Capital traders. Portfolio manager Michael Steinberg was arrested in March 2013 and accused of using inside information to make $1.4 million in profits for SAC Capital. In June 2013 nine former SAC employees were charged with conspiracy and securities fraud. With the conviction of Mathew Martoma on February 6, 2014 after a speedy four week trial, a total of eight former SAC Capital employees have been found guilty.
In July 2013 the SEC filed a civil suit against SAC for failing to properly supervise its traders and the U.S. Department of Justice "filed a five count criminal indictment by a federal grand jury, including four counts of securities fraud and one count of wire fraud." SAC reports that it will "vigorously fight" the accusations and charges. In November 2013, SAC Capital agreed to plead guilty to all counts of the indictment, stop managing funds for outsiders, and pay a $1.2 billion fine. Trading teams at SAC have since left to join competing hedge funds, such as BlueCrest Capital Management, Millennium Management, and Balyasny Asset Management.
- Steve Cohen's Trade Secrets Bloomberg, February 26, 2010
- The Most Powerful Trader on Wall Street You've Never Heard Of BusinessWeek. July 21, 2003.
- "SAC tells investors it got government subpoena". MarketWatch. Retrieved 2013-10-15.
- Flitter, Emily (July 25, 2013). "U.S. charges SAC Capital with insider trading crimes". Reuters. Retrieved July 31, 2013.
- "Mishedlo [Post of the Day] April 1, 2005". Fool.com. 2005-04-01. Retrieved 2013-10-15.
- Herbst, Svea. "SAC's lower returns may ignite pushback on fees". Reuters. Retrieved 2013-10-15.
- "Steven Cohen | Institutional Investor's Alpha". Absolutereturn-alpha.com. 2008-06-26. Retrieved 2013-10-15.
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- "SAC Capital turns the tables on Biovail". Reuters. Retrieved 2013-10-15.
- Valeant Pharmaceuticals Press Release, November 4, 2010
- Weidlich, Thom (2009-02-13). "Chanos Saw Nonpublic Fairfax Research, E-Mails Show (Update3)". Bloomberg. Retrieved 2013-10-15.
- Nesto, Matt (July 25, 2013). "SAC Capital Indicted for Criminal Securities Fraud". Yahoo! Finance. Retrieved July 25, 2013.
- Pulliam, Susan (2010-11-22). "FBI Raids Hedge Funds as Insider-Trading Probe Widens - WSJ.com". Online.wsj.com. Retrieved 2013-10-15.
- "SAC Settles Insider Trading Cases for $614 Million". New York Times. Retrieved 15 March 2013.
- "Hedge Fund Manager Michael Steinberg Charged With Insider Trading". ABC News. Retrieved 29 March 2013.
- "Judge Sets SAC’s Martoma Trial for Inside Trading to November 4". JD Journal. Retrieved 2013-10-15.
- ""SAC still on hook in insider trading probe: Source"". CNBC. 2014-02-07. Retrieved 2014-02-07.