The Blackstone Group L.P. (NYSE:BX) will have its money remain with SAC Capital Advisors, amidst the U.S. government probe of the fund for insider trading and last week’s withdrawal by Titan Advisors LLC.
Currently seven SAC employees–both current and former ones– have either been charged or implicated in the hedge fund insider trading review, along with their sources for trading tips, the firm and its top gun, Steven A. Cohen.
According to Reuters, sources have The Blackstone Group L.P. (NYSE:BX)’s asset management unit saying it will keep its $550 million investment with the hedge fund. This comes after discussions were held between the two about the investigation for insider trading as well as The Blackstone Group L.P.’s investors also reaching this decision.
For SAC, its external investors have a middle of February deadline to decide if they want to withdraw their money or not. This is one of four times per year that a redemption can be done. It also means that The Blackstone Group L.P. (NYSE:BX), whose investment represents about 9 percent of external money invested in the hedge fund, still has time to change their mind, should news from the insider trading investigation alter their decision.
Don Steinbrugge, chairman of the hedge fund consulting and marketing firm Agecroft Partners, said to Reuters that institutional investors that do have some money with SAC Capital will make up their minds on whether to stay with the fund, but there will be investors that “will look to leaders in the industry to help guide them.”
One investor, a pension fund from Louisiana that has money in a Blackstone fund through money at SAC Capital, doesn’t plan to pull out their money. Robert Klausner, a Florida attorney who represents the Louisana fund said to Reuters, ”I am unaware of any representation by Blackstone that they are pulling out.”
But one firm has already decided to pull their money with the investigation going on and that’s Titan Advisors LLC.
Last week, the Wall Street Journal broke the news, but a money figure for the withdrawal had not been cited; however, FoxBusiness had reported that Titan has an overall investment of $3 billion across 20 hedge funds, citing a March securities filing.
This action has been viewed as notable, since Titan’s founder George Fox had been an early SAC investor.
The action of investor redemptions comes as U.S. authorities brought charges against SAC’s former portfolio manager, Mathew Martoma in November. Allegations against him includes the use of inside information to create profits and avoid losses of $276 million from the drug stocks, Elan Corporation, plc (NYSE:ELN) and Wyeth Limited (NSE:WYETH) (BOM:500095) .
In addition, pressure has recently increased on Cohen, as the Securities and Exchange Commission had said to the SAC that it could see charges from the Martoma incident. The scope of the investigation has also expanded to include trading by the firm in Weight Watchers International, Inc. (NYSE:WTW) and InterMune, Inc. (NASDAQ:ITMN).