SAC Exit Opportunity; Some Think Twice

Chidem Kurdas

Beset by legal troubles severe enough to threaten its existence, Steven Cohen’s SAC Capital retrenched but kept going. Some investors in the flagship, SAC Capital International, had a window of opportunity at the end of September to get their money back. Several billion dollars already left the fund but redemptions were slowed down by a quarterly 25% withdrawal limit – or gate – per investor.

Now that the gate is open again, it sounds crazy to stay in the fund. This summer SAC was indicted on criminal insider trading charges; according to recent news stories the government is demanding $1.8 billion to end the case. Mr. Cohen agreed to pay some $600 million to the U.S. Securities and Exchange Commission to settle civil charges.

On the other hand, SAC continues to perform well. One investor has reduced the stake in the fund rather than taking it all out. It is not impossible – though obviously difficult – that something of SAC will survive after Mr. Cohen uses his private fortune to settle with the Justice Department.

The government has dressed up its charges as “fraud” but that is nonsense. Fraud involves false information and deception, whereas inside trading does not. Prosecutors and regulators like to call everything fraud, probably to boost their case in the public eye.

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