S.A.C. Capital Advisors
|Founder||Steven A. Cohen|
|Defunct||2016 (converted into Point72 Asset Management in 2014)|
|AUM||$16 billion (2008)|
|Owner||Steven A. Cohen|
Number of employees
SAC Capital Advisors was 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 reportedly lost many of its traders in the wake of various investigations by the Securities and Exchange Commission (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 pleaded guilty to insider trading charges and paid $1.2 billion in penalties (in addition to $616 million already paid to the SEC), although no formal charges have been filed against Cohen himself. The firm has shrunk after returning the vast majority of its outside (i.e. not controlled by Steven Cohen personally) investor capital. Point72 Asset Management was established as a separate family office in 2014. SAC ceased to exist as a separate entity in 2016.
The company started trading with $25 million in 1992, grew AUM to $16 billion, and became the world's highest-returning hedge fund: SAC averaged annual returns of 30% net of fees under a 3% management fee and 50% performance fee from 1992 to 2013. 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 across four independent portfolios at the start of 2013. 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. SAC Capital maintained offices in Stamford, Connecticut, New York City, Hong Kong, Tokyo, Singapore, London, Boston, San Francisco, and Chicago.
In March 2006, 60 Minutes reported on a lawsuit against SAC filed by Biovail, a Canadian pharmaceutical company which 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 analyst John Gywnn and his employer Morgan Keegan to publish negative reports on FFH and drive its stock price down. In December 2008, Fairfax Financial Holdings provided evidence to the court of email exchanges among the hedge funds and Gywnn, discussing the content of the soon-to-be-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 four-week trial, a total of eight former SAC Capital employees were 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 said it would "vigorously fight" the accusations and charges but shortly thereafter, 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. On September 8, 2014, Martoma was sentenced to 9 years in prison and ordered to forfeit nearly $9.4 million, more than his net worth.
- Steve Cohen's Trade Secrets Bloomberg.com, February 26, 2010
- The Most Powerful Trader on Wall Street You've Never Heard Of BusinessWeek. July 21, 2003.
- Copeland, Rob (December 31, 2013). "SAC Capital Outperforms Peers in 2013". The Wall Street Journal.
- "SAC tells investors it got government subpoena". MarketWatch. November 23, 2010. Retrieved 2013-10-15.
- Flitter, Emily (July 25, 2013). "U.S. charges SAC Capital with insider trading crimes". Reuters. Retrieved July 31, 2013.
- SEC Investment Adviser Public Disclosure (IAPD)
- "Steven Cohen | Institutional Investor's Alpha". Absolutereturn-alpha.com. 2008-06-26. Retrieved 2013-10-15.
- Agustino Fontevecchia (March 13, 2014). "Steve Cohen Personally Made $2.3B In 2013 Despite Having To Shut Down SAC Capital". Forbes.
- Ullatil, Parvathy (December 4, 2009). "UPDATE 1-SAC Capital grows in Asia with Singapore office". Reuters.
- Tunick, Britt Erica (March 1, 2010). "Inside SAC's Shark Tank". Institutional Investor.
- Jennifer Ablan (December 9, 2013). "SAC agrees to sell reinsurance business to investor group". Yahoo! Finance.
- Betting On A Fall, Lesley Stahl On One Company's Lawsuit Against A Hedge Fund - CBS News, March 26, 2006 Archived May 27, 2008, at the Wayback Machine
- Kouwe, Zachery (August 21, 2009). "Judge Dismisses Biovail's Suit Against Hedge Fund". The New York Times.
- "SAC Capital turns the tables on Biovail". Reuters. February 19, 2010. Retrieved October 15, 2013.
- Valeant Pharmaceuticals Press Release, November 4, 2010
- Dealbook (November 4, 2010). "Biovail Settles With SAC Capital". The New York Times. Retrieved April 10, 2017.
- Weidlich, Thom (February 13, 2009). "Chanos Saw Nonpublic Fairfax Research, E-Mails Show (Update3)". Bloomberg. Retrieved October 15, 2013.
- Thom Weidlich (March 16, 2012). "Morgan Keegan Loses Dismissal Bid in $8 Billion Fairfax Suit". Bloomberg Businessweek.
- Ahmed, Azam (September 14, 2011). "Judge Drops SAC Capital as Defendant in Civil Suit". The New York Times.
- "Cohen's SAC Capital scores legal win over Fairfax". Reuters. September 14, 2011.
- Nesto, Matt (July 25, 2013). "SAC Capital Indicted for Criminal Securities Fraud". Yahoo! Finance. Retrieved July 25, 2013.
- Pulliam, Susan (November 22, 2010). "FBI Raids Hedge Funds as Insider-Trading Probe Widens - WSJ.com". Online.wsj.com. Retrieved 2013-10-15.
- Lattman, Peter; Ahmed, Azam (February 8, 2011). "Insider Inquiry Steps Up Its Focus on Hedge Funds". The New York Times.
- Lattman, Peter (2012-11-20). "Insider Inquiry Inching Closer to a Billionaire". The New York Times.
- Lattman, Peter (March 15, 2013). "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. February 7, 2014. Retrieved February 7, 2014.
- "Nine years prison term given to ex-SAC manager". CNBC. September 8, 2014. Retrieved September 8, 2014.