| Type | LLC, Private |
|---|---|
| Industry | Hedge Fund |
| Founded | 1992 |
| Founder(s) | Steven A. Cohen |
| Headquarters | New York, New York, United States |
| AUM | $14 Billion |
| Owner(s) | Steven A. Cohen |
| Employees | 800 |
| Website | www.careers.sac.com |
SAC Capital Advisors (SAC Capital Partners, SAC Capital Management) is a $14 billion dollar group of hedge funds founded by Steven A. Cohen in 1992. The firm employs approximately 800 people [1] across its offices located in Stamford, Connecticut and New York City with international satellite offices.[2] In 2010, the SEC opened an investigation into insider trading at SAC.[3]
Forbes listed SAC founder Steven Cohen's estimated net worth to be $8.0 billion as of 2008.[4]
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The group manages $14 billion in assets across four independent portfolios, each with distinct mandates.[5]. Although larger multistrategy funds exist, in absolute terms SAC's long-short strategies and capital flow make it an influential price-setting hedge fund in equities. The company has branched out into alternative investment strategies including private equity and emerging markets through expansion.
According to Bloomberg BusinessWeek magazine, SAC Capital Advisors routinely accounts for as much as 3% of the New York Stock Exchange's average daily trading, plus up to 1% of the NASDAQ's—a total of at least 20 million shares a day. Average trading volume rivals Fidelity Investments and Capital Research and Management. The fund is widely known to pay brokers the highest commissions of any equities-focused investment group. In addition to the firm's numerous short-term trades, SAC reportedly has a considerable longer-term stake in Google and search engine Baidu, controlling 19.5% as of 2006.[6]
While most hedge funds charge a management fee of 2% of AUM and 20% to 30% of the annual returns, SAC keeps 3% and 50%—the highest in the industry. Favored industries for the fund include healthcare, followed by high technology, industrials and retail/consumer goods. SAC has also been very active in financial sector equities over the last decade, with a number of traders focused on the financial sector exclusively.
Former traders and rivals say one way Cohen built his business and relationships with brokers was by buying secondary offerings, when public companies decide to bring more shares to market, on which brokers receive around 40 cent to $2 a share on a built-in sales commission. "If you take down a million shares of a secondary, you've just paid your broker $1.5 million," says a fund manager. "That's how Stevie started off paying the Street."
The company is incorporated offshore in Anguilla, British West Indies,[7] and its trading offices are located in Stamford, Connecticut and New York City. SAC also maintains satellite offices in San Francisco, Hong Kong, Boston, and London.[8] The firm employs approximately 800 people, of which about 150 are investment personnel and 20 are staffed in legal and compliance[9].
In March 2006, 60 Minutes reported on a lawsuit against SAC and Camelback (now known as Gradient Analytics) by Biovail, a Canadian pharmaceutical company. According to the report, in the spring of 2003 SAC asked Camelback, an Arizona stock analysis firm, for a report on Biovail. Former Camelback employees alleged that SAC had determined the content and timing of their reports on Biovail in order to drive the price of the stock down. Camelback said the former employees were lying and disgruntled and had been fired for poor performance and unethical conduct, and that it had already written a negative report on Biovail that pre-dated the alleged conspiracy. In the following six months, Biovail’s stock fell 50 percent; however, the company issued two disappointing earnings statements. Biovail CEO Eugene Melnyk insists it was the Camelback reports that triggered the sell-off.
The CBS report also noted that ten years previously Melnyk had sued another hedge fund, accusing it of spreading rumors about his stock in order to sell it short. SAC denied all the charges and said that the stock was overvalued and that the decline was due to earnings shortfalls and regulatory investigations.[10] In March, 2008, the U.S. Securities and Exchange Commission sued Biovail and some of its former officers, for accounting fraud, particularly that "Biovail actively misled investors and analysts about the reasons for the company's poor performance". Biovail settled for $10 million.[11]
On February 19, 2009, Judge Stanley R. Chesler of the United States District Court for the District of New Jersey dismissed the claims of shareholders, writing: “… the factual allegations of the Amended Complaint have a tainted origin and, as events following its filing confirm, are incompatible with Biovail’s admission of guilt in a kickback scheme that the Amended Complaint accuses Defendants of falsely reporting and with Biovail’s admissions, in connection with the settlement of the SEC enforcement action, of making false statements that inflated its stock price.”
On August 20, 2009, New Jersey Superior Court Judge Donald Goldman dismissed all of Biovail's claims against SAC Capital.[12] The judge ruled that Biovail and its attorneys launched a choreographed strategy designed to constitute a counterattack against Biovail's stock action, and that its attorneys "ignored their professional and ethical obligations and aided Biovail for their own benefit."
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.[13]
On November 4, 2010, SAC Capital and Valeant Pharmaceuticals International, which merged with Biovail in June 2010[14], announced that they had agreed to settle the lawsuit[15]. Under the settlement, Valeant paid $10 million to SAC[16]. Valeant’s chief executive officer, J. Michael Pearson, said, “The initiation of litigation against SAC and others in 2006 by Biovail’s management at the time was regrettable…We would like to put this incident behind us[17].”
In July 2006, Steven Cohen's SAC Capital Advisors, Jim Chanos' Kynikos Associates, Dan Loeb's Third Point LLC, and former Morgan Keegan analyst John Gywnn were sued by Fairfax Financial Holdings Ltd (FFH) 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, while the funds shorted FFH's stock.[18] 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.
On September 14, 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. The judge noted that SAC Capital Advisors largely owned positions that would profit from a rise – not a drop – in the share price of Fairfax, undermining the very basis for the suit.[19]
In his 32-page opinion, Judge Hansbury noted that: “It does not make sense that the alleged leader of the conspiracy would not only NOT act as its alleged cohorts did, but in fact, stand to lose money as a result of the alleged conspiracy. There is no direct evidence of any sort of conspiracy involving SAC to take down Fairfax, and any allegation of such, is too much speculation based on circumstantial evidence to get past summary judgment.”
In November 2010, the SEC conducted raids at the offices of Level Global Investors LP, Diamondback Capital Management LLC, two funds run by former SAC traders. Loch Capital Management LLC was also raided on the same day. This led to wide speculation that the real target is SAC Capital Advisors. [20] It was reported in the press that several days after the raids SAC had received "extraordinarily broad" subpoenas . [21] On 8 February, 2011, two former employees were charged with insider trading, one pleading guilty.[22]
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