Hedge fund mogul Steve Cohen plans comeback in January
SAC founder’s new venture aims to charge some of the industry’s highest fees
At a time when many titans of the hedge fund industry are quietly closing up shop or restricting their services to friends and family, one of the most infamous is readying a comeback.
Steve Cohen, whose SAC Capital was shut down by US authorities after the fund company pleaded guilty to insider trading, is expected to return to the hedge fund industry at the start of 2018. That is when a ban on him managing outside money lifts.
Mr Cohen is betting that his previous success will attract new investors willing to pay some of the highest fees in the industry at a time when many of his rivals are being forced to cut their charges. SAC Capital grew into a $15bn trading behemoth with returns often in excess of 30 per cent a year.
According to marketing documents he has sent to some prospective investors, Mr Cohen is proposing to charge a 2.9 per cent management fee and a performance fee on a sliding scale of 10 to 30 per cent. If returns exceed 20 per cent, it will trigger the 30 per cent performance fee.
A spokesman for the fund declined to comment.
Hedge funds have traditionally charged 2 per cent for management and 20 per cent performance fees, but those levels are under pressure.
Funds including Michael Platt’s BlueCrest, Richard Perry’s Perry Capital, Eric Mindich’s Eton Park Capital, and John Griffin’s Blue Ridge Capital have all shut down or converted to managing family money.
Some investors say that despite the high fees and SAC Capital’s history of insider trading, they are reluctant to let the opportunity slip away. Since SAC was shut to outside money, Mr Cohen’s family office, Point72, has been managing more than $11bn of his own fortune.
But a hedge fund adviser said that other investors were more cautious, even though the fund is expected to open to new money early in the new year then quickly close after raising a few billion dollars.
“My view of the institutional investor environment is they are more relaxed about this. They feel like if they miss it on the first go, they’ll get in later. I don’t see that same stress that people used to see,” the adviser said.
The public fund will launch on January 1, with a minimum investment of $100m, according to marketing documents sent out in the autumn. Investors will have to agree to have their money locked up for one year, and will face penalties if they withdraw in the second year.
Mr Cohen has declined to make himself available to speak to prospective investors ahead of the launch.
Mr Cohen began laying the groundwork for his return to the industry last spring by opening Stamford Harbor Capital next door to Point72. Because of the ban, he has not been allowed to personally supervise the fund.
SAC Capital pleaded guilty to insider trading in 2013 and paid a record $1.8bn in fines. Mr Cohen was never personally charged with insider trading but several of his portfolio managers were convicted of the crime and sentenced to prison terms.
The industry has grown from managing $2.6tn in 2013 to $3.2tn this year, according to data from Hedge Fund Research.