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SAC Capital looking at just managing insider capital

Under criminal indictment and facing the depletion of its outside assets by year end, SAC Capital is laying the groundwork to become a firm that manages solely insider capital—otherwise known as a family office, say people who work there.

In recent months, SAC's portfolio managers have been talking in earnest, both with management and among themselves, about how converting to a family office would work, said one of these people.

A SAC family office would likely continue the same long-short equities strategy it has embraced for two decades, say people familiar with the discussions, with small allocations in quantitative trading and "macro," a global trading style that uses a combination of bonds, stocks, and currencies, as well. It is unclear whether it would incorporate founder Steven Cohen's other investments, such as real estate or art, or use the company to manage the financial affairs of his own large family.

(Read more: SAC Capital pleads not guilty to all charges in court)

"It might be a pure play private asset management company, and may have investment objectives that reflect the desire of Steve Cohen as opposed to addressing the investment interests of other family members," said Raffi Amit, a professor at the University of Pennsylvania's Wharton School who runs a family business research center there. In some cases, he adds, "it's very very hard to make this conversion. The nature, culture, mentality, and objectives change, because usually hedge funds have a much narrower scope of activities."

A SAC spokesman declined to comment on the family office plans. But in all likelihood, say the people familiar with SAC's planning, its assets under management would drop from the $9 billion to $10 billion in insider capital that it currently deploys, as some internal investors opted out. And while some of the firm's 125 or so portfolio managers are almost certain to leave by early next year, these people add, a large proportion of the traders are planning to stay. One possible incentive: the 3 percent payout Cohen gave money managers for 2012 on top of their annual bonuses, a perquisite he is expected to give out again in 2013 to those who remain.

The hedge fund was up 1 percent in August and more than 11 percent year-to-date through August.

(Read more: SAC Capital refutes allegations against Steve Cohen)

Even though the active planning of an SAC family office is relatively recent, the idea itself is not. Since February, when outside investors pulled nearly $2 billion of the $6 billion in external capital they started the year with, speculation that Cohen would change his firm's registration has been rife. Family offices are shielded from much of the regulatory scrutiny that hedge funds receive. And offering to cease managing public investor money—an activity the Securities and Exchange Commission and the Justice Department believe SAC has not been conscientious about—has long been regarded as a potential aspect of any settlement with the government.

—By CNBC's Kate Kelly. Follow her on Twitter @KateKellyCNBC.

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