Looking back on SAC's legal troubles and Farallon's stumbles

By Rob Copeland

Tue Mar 19, 2013

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Absolute Return also revisits strong growth for the Billion Dollar Club.


One year ago

>> It was a less complicated time for SAC Capital Advisors. Founder Steve Cohen was attracting attention for a failed bid to buy the Los Angeles Dodgers, not for being the target of government insider trading probes.

That changed last fall when the Securities and Exchange Commission and Department of Justice charged ex-SAC portfolio manager Mathew Martoma with insider trading. SAC settled the Martoma-related civil case last week with a $616 million payout, which the SEC said was the largest settlement ever for insider trading (the firm didn't admit or deny the allegations). But the SEC indicated that, despite the settlement, future charges could still be leveled against others connected to the firm, including Cohen, and criminal charges against Martoma are still in process

"I don't want to leave you with the thought that this means everything is cleared up," SAC President Tom Conheeney reportedly told investors afterward.

SAC's assets rose to $15 billion this January, up $1 billion from a year earlier. The Wall Street Journal has reported that $1.7 billion of redemptions are imminent (see more on assets here).

External spokesman Jonathan Gasthalter of Sard Verbinnen & Co. issued the following prepared statement: "This settlement is a substantial step toward resolving all outstanding regulatory matters and allows the firm to move forward with confidence." He added, "Steve Cohen has not been charged with any wrongdoing and has done nothing wrong."

See also: SAC's Cohen gives $17M for veterans' mental health research - Former SAC, Jefferies HR head joins AQR

>> The largest Americas hedge funds--those managing $1 billion or more--increased their assets by 2.96% over the previous year to $1.335 trillion, according to the Absolute Return Billion Dollar Club.

The past year was even better, with Club assets up 9.3% in twelve months to $1.46 trillion. The complete list of 269 firms is available here.

See more Research & Rankings

Five years ago

>> In a cover story, Absolute Return posed the question of whether Tom Steyer's Farallon Capital Management, which reached $36 billion at the start of 2008, was growing too fast.

The question was well timed. By midyear 2008, even before the main losses of the financial crises, the firm was down 12.5% through August in its flagship multistrategy fund, and ended the year down 36%. Redemption requests poured in and Farallon responded by creating a liquidating trust to manage the outgoing assets. The firm's assets had declined to $20 billion by January 2009.

The trust was fully distributed by the end of 2009, with an internal rate of return of 14% on average, a person close to the firm said.

Then in October 2012, Steyer officially confirmed his long-tipped plans to retire, turning over control to co-managing partner Andrew Spokes. The firm's flagship fund gained 11.42% in 2012, compared with an 8.66% rise for the Absolute Return Multistrategy Index. Despite the gain, assets fell from $19.2 billion at the start of the year to $18.6 billion at the end.

Steve Bruce, an external spokesman for Farallon at PR shop ASC Advisors, declined to comment.

See also: Former Farallon man sets up Route One - Farallon loses top value execs - Farallon loses New Mexico pension allocation

ISSN: 2151-1845 / CDC10004H