The first of the year has come and gone and, for the first time in nearly half a decade, Steve Cohen can legally manage outside money. To wit, his new firm, Stamford Harbor Asset Management, the successor firm to both his family office Point72 Asset Management and one-time “criminal enterprise” SAC Capital Advisers, is aiming to raise between $3 billion and $4 billion of outside capital to augment the $10 billion of Cohen’s own money that will be managed by the fund.
We memorably picked up on the SEC investigation into Cohen’s former firm there years before SAC pled guilty to insider trading – “Is SEC’s Insider Trading Case Implicating FrontPoint Really Just A Sting Operation Aimed At SAC Capital?” And it appears, according to a Bloomberg profile of Cohen’s new firm, that CYA is once again a top priority for the legendary hedge fund trader, who managed to evade prosecution despite years of work by the SEC and then-US Attorney Preet Bharara. Though some of his former employees weren’t so lucky.
Even though reversals by appellate court judges in recent years have made it more difficult for prosecutors to prove insider trading – they must now prove that the person supplying the information received some material benefit for the tip – Stamford Harbor will be operating under the watchful eye of an outside monitor who reports directly to the SEC.
To help mitigate the appearance of wrongdoing, Cohen has hired a 50-person compliance team who will be situated in the middle of the trading floor, listening to conversations, monitoring emails and flagging anything suspicious that they should come across.
Bloomberg compared it to “Big Brother.”
Inside what will be his Stamford Harbor Capital sits a command center in the middle of the trading floor. There, a 50-member compliance team is strategically positioned to listen in on traders’ conversations in real time, comb through emails for suspicious language and even veto job candidates.
The room is part of billionaire Cohen’s preparations to open the fund after his two-year ban on managing outside capital ended last week. The new firm, based in the same Stamford, Connecticut-based building as his family office, is slated to manage $3 billion to $4 billion of client money in addition to his own $10 billion-plus fortune. Through the internal oversight, Cohen looks to be trying to ensure that no one ever calls his new venture a “criminal enterprise.”
That’s the description that former U.S. Attorney Preet Bharara gave Cohen’s previous hedge fund SAC Capital Advisors.
Four years ago, the firm pleaded guilty to securities fraud and paid a record $1.8 billion fine to settle a seven-year federal insider-trading probe. Ever since, Cohen, who wasn’t charged with any wrongdoing, has been working to rebuild his reputation at his Point72 Asset Management, the firm that manages his own fortune.
Back in 2015, Cohen hired a former high-ranking Justice Department official to lead his compliance team.
In 2015 he hired chief legal officer Kevin O’Connor, who once held the third-highest ranking position at the Justice Department. As part of his deal with the government, there’s an outside monitor — Michael Considine, an attorney at Seward & Kissel, who reports directly to the U.S. Securities and Exchange Commission and will continue to file periodic reports until at least the end of 2019.
There’s also an “Intelligence Team” that will help SAC root out risky hires.
The firm’s so-called Intelligence Team includes analysts who have five to 10 years of prior experience working in the U.S. intelligence community or as investigators, according to a job posting on LinkedIn late last year.
According to Bloomberg, some long-term traders have bristled under the increased scrutiny. Perhaps this is why one of Cohen’s top traders left late last year just as the firm was preparing to accept outside money once again.
After moderating his expectations for the outside capital raise – to between $3 billion and $4 billion down from $10 billion – Cohen is seeking the same onerous terms that made SAC infamous for being one of the most venal firms on Wall Street. Not only is Cohen asking investors to agree to lock up their capital for up to three years, he’s demanding management fees of 2.75% of total assets plus 30% of any profits.
As stocks have climbed to record highs, fees on index tracking ETFs have fallen to a few basis points – much lower than they were when SAC pleaded guilty in 2013.
Whether Cohen is successful in reaching his goals for outside money remains to be seen.
via RSS http://ift.tt/2Cthv7h Tyler Durden