UPDATE 2-SAC Capital affiliate Parameter Capital closes -sources
NEW YORK, Aug 12 (Reuters) - An affiliated fund of Steven A. Cohen's SAC Capital Advisors shut down last week as the $14 billion hedge fund begins to shrink in the wake of a criminal indictment filed against it in July, according to two people familiar with the unit's closure.
Parameter Capital Management, which had managed money for SAC since 2010, traded mainly financial stocks. The team was run by portfolio managers Glenn Shapiro and Anil Stevens. Stevens is leaving to launch his own fund, according to one of the sources.
The sources said the decision to close Parameter was planned before federal prosecutors charged Cohen's firm in a five-count indictment with fostering a culture in which employees flouted the law and were encouraged to tap their personal networks for inside information about publicly traded companies.
Parameter's returns were up this year, the sources said. SAC gained more than 10 percent net of returns for the year through July, according to a person with knowledge of the situation.
Tom Conheeney, SAC Capital's president, sent an email to employees on Saturday in response to news reports about the future of SAC's business and structure. In the email, according to one of the sources, Conheeney said the firm will have as much capital to invest at the year's end as it had in 2009.
Parameter's Stevens is taking 8 of 9 people who worked in the unit with him, one of the sources said. Stevens has been planning to start his own firm for some time, the person added.
Shapiro's plans are unknown.
Both people familiar with Parameter's closure were not authorized to speak publicly about SAC. It was unclear how much money Stevens and Shapiro oversaw for Cohen's hedge fund, which is in the process of returning $5 billion in outside investor money by the end of the year.
Parameter is mentioned in regulatory filings as one of 9 affiliated entities that manage money for SAC Capital, the hedge fund Cohen launched 21 years ago with $25 million.
In the aftermath of the federal indictment, Cohen and his top lieutenants are taking steps to reassure SAC Capital's roughly 1,000 employees that the fund is not in jeopardy.
In his email, Conheeney described as inaccurate some media reports that SAC Capital will need to get much smaller as it returns money and might collapse or streamline businesses.
On Friday, a U.S judge approved an agreement between the Connecticut-based fund and federal prosecutors to allow the firm to continue to operate while the criminal case proceeds. SAC has pleaded not guilty.
Parameter's closing comes as about a dozen marketing and sales people were let go by Cohen's hedge fund over the past few weeks.
"It is not that surprising that SAC would lay off marketing staff. Under the circumstances, it is unlikely that SAC would try to raise new capital now," said Robin Judson, a recruiter who works with hedge funds.
Investors in Cohen's fund, who have already pulled several billion dollars this year, have until the end of this week to submit a request to redeem their capital by the end of the year.
Shapiro and Stevens rejoined SAC to run Parameter in 2010 after both spending time trading stocks for Chicago-based hedge fund Balyasny Asset Management. Both had worked for SAC for a number of years prior to joining Balyasny.
Two other former SAC traders, Larry Sapanski and Richard Schimel, are also preparing their own stock-focused hedge funds, according to Absolute Return, citing people familiar with the situation.
Sapanski and Schimel closed their Diamondback Capital Management last year due to significant investor redemptions that began when Diamondback became embroiled in the government's insider trading probe. Sapanski and Schimel were never accused of any wrongdoing.