Say it ain’t so, Stevie!
Investors worried about an insider-trading scandal that has engulfed SAC Capital Advisors want to get the straight scoop directly from the hedge fund’s billionaire boss, Steve Cohen.
SAC’s senior management is planning to hold a special call today to try to allay concerns after a former portfolio manager was charged in the government’s widespread crackdown on insider trading.
One former SAC investor, whose firm pulled capital in 2011 due to concerns about insider trading, said those remaining will “want to hear at least directly from Stevie, preferably with non-gamed, pre-sent Q&As.”
“I would want to hear about this specific dealing and why this guy was a lone wolf,” the investor said.
Last week Mathew Martoma became the ninth former SAC portfolio manager to be implicated in insider trading; three have pleaded guilty to such crimes while at SAC. But Martoma’s indictment marked the first time Cohen himself was referenced in court documents. Cohen has not been charged with wrongdoing.
The feds have been trying to persuade Martoma to become a cooperating witness.
“I don’t think Cohen saying he’s innocent will be enough” to satisfy many investors, said a hedge-fund consultant. “It’s circumstantial, but it smells bad.”
A source close to the firm said management would be on the call before the opening bell but did not know whether Cohen would be.
When indictments surfaced in the past, SAC has trotted out general counsel Peter Nussbaum and Steve Kessler, the head of compliance, to settle investors’ nerves with long discussions of the firm’s state-of-the-art compliance system.
But that won’t cut it this time.
“The compliance team and legal team are not there to protect the clients; they are there to protect Cohen,” said one hedge-fund exec.
The $14 billion hedge fund giant will not say whether the firm or Cohen is under investigation, despite reports that prosecutors have been trying to build a case against Cohen. The firm has provided trading records to the feds as part of a widespread investigation into insider trading.
“Mr. Cohen and SAC are confident that they have acted appropriately and will continue to cooperate with the government’s inquiry,” said SAC spokesman Jonathan Gasthalter.
The taint of scandal has led many investors to flee in recent years. Despite SAC’s move to lure investors by cutting its fees, the firm’s capital base has not recovered to its pre-crash level of $16 billion.
From its launch in 1992 through 2007, SAC had an annualized return of 35 percent — profits that cemented Cohen’s legendary status and fed his lavish lifestyle, including an impressive art collection. Since then, such lofty returns have been hard to come by. SAC has gained 10 percent this year, far better than its peers.
The next time investors can get out is March 31, and notice must be given Feb. 14. Even if they all flee, it won’t mean the end of SAC Capital. Today 60 percent of the firm’s capital is held by insiders, with the vast majority of that — $8 billion — by Cohen himself.
mcelarier@nypost.com
