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Who's in Trouble? SAC Capital Posts Impressive June Results

Steven A. Cohen
Scott Eells | Bloomberg | Getty Images
Steven A. Cohen

SAC Capital Advisors, the hedge fund firm run by billionaire Steven A. Cohen that has been under intense scrutiny as part of an insider trading investigation, posted a surprisingly strong return in June amid a global market selloff.

One of SAC Capital's main funds posted a 1.5 percent gain, leaving the portfolio up 8.25 percent for the year after deducting fees, according to an investor familiar with the numbers. SAC charges some of the highest fees in the $2.2 trillion hedge fund industry.

The firm outperformed both the average for hedge funds for the month and the broader market during a tumultuous period for global bond and stock markets.

Some SAC investors have expressed concerns privately that the federal probe, which has increasingly focused on Cohen, might distract the manager and his 115-plus portfolio managers.

A sharp selloff in bonds and stocks last month tripped up a number of big-name hedge funds, including Daniel Loeb's Third Point, David Einhorn's Greenlight Capital Management and Ray Dalio's Bridgewater Associates, Reuters has reported.

SAC Capital, which notified investors of its latest results late Monday, did not provide any details about what contributed to the performance.

The average hedge fund lost about 2.1 percent last month, according to early estimates by Bank of America Merrill Lynch. That compares with a roughly 1.7 percent decline for the broad Standard & Poor's 500 stock index. The S&P was up 12.6 percent for the first half.

Peter Laurelli, a vice president at hedge fund research firm eVestment, said that SAC's most recent regulatory filing detailing its stock holdings implies that Cohen's fund may have tactically positioned to profit from a selloff.

"If you review SAC's 13F, filed May 15, it is interesting that two of the top three positions are index put options," he said. "To me, that would explain a lot of the positive return in a negative environment."

A put option gives the buyer the right to sell the underlying security at a predetermined price and is often used by investors who expect the price of the underlying asset to decline.

Kenneth Griffin's Citadel also had a strong month. Its main investment funds, known as Kensington and Wellington, gained 1.30 percent, to finish the first half up 7.60 percent. Strong stock-picking, plus bets on energy and selected fixed-income securities, helped fuel the gain, according to a person familiar with the Chicago-based firm.

Citadel has been among a handful of funds that investors said might benefit when outside money leaving SAC is reinvested.

Those results compare with declines at other large funds last month, according to early numbers. Greenlight's flagship portfolio fell 1.1 percent, while Third Point's Partners fund fell 1.7 percent. Bridgewater's All Weather fund was hit particularly hard, losing about 6 percent through the third week of June.

SAC's strong results followed the latest round in the government's insider trading inquiry.

In May, federal prosecutors sent a grand jury subpoena to Cohen seeking his testimony in connection with the investigation. He indicated that he would assert his constitutional right not to testify, and it is believed prosecutors never sought his testimony, said a person familiar with the inquiry.

SAC Capital has until the end of the year to return money to outside investors who requested their money back. Even then, it will be managing at least $8 billion of Cohen's and employees' personal fortunes.

The firm is also expected to manage about $1 billion in outside capital, including $550 million with an affiliated reinsurance firm SAC Re.

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