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November 27, 2012 7:28 pm
SAC Capital will hold a conference call with its investors Wednesday to address concerns about the hedge fund’s links to what US authorities say is the largest case of insider trading to date, according to people familiar with the situation.
Hedge funds rely on the confidence of their outside investors, which can swiftly evaporate. Level Global, a $3bn hedge fund founded by former SAC employees, closed last year following a raid by law enforcement officers that the fund said placed it under a “cloud of uncertainty”.
Anthony Chiasson, a founder of Level Global, is on trial fighting charges of insider trading. On Monday, Matthew Martoma, a former portfolio manager at SAC unit CR Intrinsic, appeared in court on charges related to trading in pharmaceutical stocks by SAC.
US authorities say that SAC avoided losses of $194m and made $83m profit by betting against the share prices of pharmaceutical companies Wyeth and Elan ahead of the results of an Alzheimer’s drug trial.
It is the first time Steven Cohen, founder and head of the $14bn hedge fund, has been linked to a wide-ranging investigation into insider trading on Wall Street.
Senior SAC management will speak to their investors before the US stock market opens at 9.30am on Wednesday, according to people familiar with the company.
SAC and Mr Cohen have not been accused of wrongdoing and the company has said it is co-operating with the inquiry. A lawyer for Mr Martoma said that he will fight the charges and expects to be exonerated.
The hedge fund holds regular calls with its investors to discuss its investments and performance and has held impromptu calls before, including to discuss the cases of Noah Freeman and Donald Longueuil, former SAC traders who pleaded guilty to insider trading charges last year.
The deadline for SAC investors to redeem their capital this year has already passed, said a person familiar with the company, so the next opportunity to do so will be in the first quarter of next year.
About 60 per cent, or $8bn, of SAC’s capital is owned by Mr Cohen and his staff, according to people familiar with the company, providing a solid base of support.
Pension funds and large institutional investors, who could not live with “headline risk”, have long been put off by SAC’s high fees, while the group’s fund of fund and wealthy private investors have so far stuck with the high-performing hedge fund.
Anthony Scaramucci, head of the fund of fund Skybridge, which invests with SAC, last week told CNBC that “there’s been nothing proven about Steve Cohen, and I think in our country we are innocent until proven guilty”.
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