SAC Capital Advisors is bracing for the possibility that many of its clients will withdraw due to the regulatory probe into its trading practices, as we first reported earlier this week. Investors into the $14 billion hedge fund have approximately a month to decide if they will pull their money out.
The Wall Street Journal reports today that SAC Capital has informed employees that at least $1 billion could be withdrawn in the next month. However a spokesperson said it was too early to speculate about how many clients would pull out.
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The quarterly redemption deadline for SAC Capital is Feb. 15, and many of the fund’s clients have already sent notification that they plan to pull their money out. Titan Advisors and Lyxor Asset Management are two large clients that have said they will pull out of the hedge fund. However several others, including Skybridge Capital, have indicated that they will keep their money in the fund.
Regulators began probing SAC’s trades in November. The fund has posted one of the best track records on the Street in 20 years, attracting money from numerous investors. Regulators are looking into the intentions of many of the fund’s investors, like The Blackstone Group L.P. (NYSE:BX), which is one of SAC’s biggest outside investors. They are also examining allegations of insider trading.
Any hedge fund which deals with a large number of client redemptions in a short amount of time can get into hot water, because it ends up having to sell off holdings at unsatisfactory prices. But SAC has protected itself by only allowing clients to pull out 25 percent of their money each quarter. Also less than half of the money managed by the fund is from clients other than owner Steve Cohen or his employees.
SAC Capital assures its investors that everything is fine at the hedge fund.