Today marked the day when SAC Capital Advisers LP first acknowledged the effects that its illegal trading, government indictments, and genuine ill-will from its customers is having on the firm. In addition to this humbling announcement, the company made it clear that its London office is no longer tenable for the company to keep open after the calendar year concludes.
SAC’s negotiation with the government
“As our negotiations with the government have unfolded, it has became clear to us that the outcome the government is demanding is likely to have a greater than first anticipated impact on the firm,” Tom Conheeney, SAC’s president, wrote in an internal memo today.
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He added: “We have concluded that we must operate as a simpler firm and reduce our capital allocations.”
SAC employed more than 1,000 people in 10 offices across the globe at the start of the year. According to a recent regulatory filing, it still had 950 on staff, a number that is expected to drop more after year-end bonuses are paid and the 50 employees that remain in the London office are let go.
“This was not something we had been contemplating,” Mr. Conhenney said, adding that the firm did not anticipate further job cuts this year. That said, the company rid itself of six traders earlier this week.
Steven Cohen barred from money management
The $14 billion fund founded by Steven Cohen has seen an exodus from its London offices in the last few months, and those familiar with SAC’s negotiations believe that Cohen will be barred from outside money management on top of a fine nearing $2 billion.
SAC has already seen six former employees plead guilty to insider trading and Michael S. Steinberg and Mathew Martoma are expected to stand trial prior to the end of the calendar year.
Presently, it’s believed that SAC is managing $9 billion of Cohen’s personal fortune now that nearly every source of outside money has pulled out of SAC. At the beginning of the year SAC was managing as much as $15 billion.
The fund, which has returned almost 30% annually over two decades, was up about 13% at the end of last month.
“You have done a great job this year under extraordinarily trying circumstances,” wrote Mr. Conheeney in the memo on Tuesday. “I don’t know another group of professionals who could have done as well as you have under the conditions we have endured during the past two years.”