January 8, 2018 marked the end of Steven Cohen’s ban from handling outside money. As most will recall, after almost a decade of investigation, his firm, SAC Capital Management, was found guilty of insider trading and a fine of $1.8 billion was extracted by the government. Cohen having failed to police the actions of Mathew Martoma, a trader at his firm, was barred from handling outside money for two years. Notably, Cohen’s settlement with federal prosecutors and SEC regulators did not include any admission of personal wrongdoing.
In the aftermath, Cohen focused on managing his personal fortune through his family office, Point72 Asset Management.
Cohen Returns to the Fray
Multiple signals suggested that he would, the most significant being the opening of Stamford Harbor Capital, also in Stamford, Connecticut and directly across the parking lot from Point72.
Moreover, Stamford Capital has contracted with JP Morgan Chase and Morgan Stanley to handle its trades. Neither has offered their high net worth customers the opportunity to invest with Cohen’s new firm, a customary practice, but on the other hand, Stamford Capital, currently registered as an investment adviser, is not yet soliciting outside money.
Cohen Polished His Image
Further evidence of Cohen’s intentions to solicit outside money was found in his words and deeds. In May of last year, Cohen showed up at a Las Vegas hedge fund conference, hardly the act of a beaten man.
One must also acknowledge that Cohen employed FBI agents and former prosecutors such as former U.S. attorney Kevin J. O’Connor and former federal prosecutor Vincent Tortorella which not only bolstered the credibility of his firm but also provided Cohen with a window into investigative and judicial machinations.
Point72’s website proclaimed that Point72 “adheres to the highest ethical standards” and in a memo to Point72 employees, he vowed, “what happened to SAC would never happen to Point72.”
Cohen Is Back!
On January 6, 2018, Steven Cohen, through filings, indicated that he plans to manage investor money through his firm, Point72 Asset Management, which has merged with Stamford Harbor Capital.
Rumors are swirling around the firm’s fee structure with management fees said to be as high 2.75 percent and performance fees of 30 percent. Additionally, reports indicate that capital lockup periods may extend to as many as three years.
These hefty terms may make attracting investors difficult, not that Cohen needs investors. After all, he has his own considerable fortune to work with and $13 billion is not a small hedge fund.
Cohen’s challenge is not so much one of overcoming his past encounter with the SEC and federal prosecutors; rather it is one of establishing a record of gains sufficiently attractive to high net worth individuals, pension funds and other institutional investors.
In 2016, unconfirmed reports suggest that Point72 had meager gains in the 1 percent range, while 2017 gains stood at a respectable 10 percent. Although his firm’s 2017 performance may have exceeded the 8.54 percent aggregate hedge fund industry performance, it was not a record of performance sufficient to create a tsunami of investors clamoring for a piece of the action. In any event, welcome back Mr. Cohen!