NEW YORK (Reuters) – SAC Capital Advisors, the hedge fund firm run by billionaire Steven A. Cohen that has been under intense scrutiny as part of an insider trading investigation, posted a surprisingly strong return in June amid a global market sell-off.
One of SAC Capital’s main funds posted a 1.5 percent gain for the month, leaving the portfolio up 8.25 percent for the year after deducting fees, according to an investor familiar with the numbers.
SAC charges some of the highest fees in the $2.2 trillion hedge fund industry.
The firm outperformed both the average for hedge funds for the month and the broader market during a tumultuous period for both global bond and stock markets.
Some investors with SAC have privately worried that the federal government’s investigation, which has increasingly focused on Cohen, might distract the manager and his more than 115 portfolio managers.
A sharp selloff in bonds and stocks last month tripped up a number of big-name hedge funds, including Daniel Loeb’s Third Point, David Einhorn’s Greenlight Capital Management and Ray Dalio’s Bridgewater Associates, Reuters has previously reported.
SAC Capital, which notified investors of its latest results late Monday, did not provide any details about what contributed to its performance in June.
In June the average hedge fund lost about 2.1 percent, according to early estimates by Bank of America Merrill Lynch. That compares with a roughly 1.7 percent decline for the broad Standard & Poor’s 500 stock index. The S&P was up 12.6 percent for the first six months of the year.
Peter Laurelli, a vice president at hedge fund research firm eVestment, said that SAC’s most recent 13F regulatory filing detailing the firm’s stock holdings reveal that Cohen’s fund may have tactically positioned to profit from selling in stocks.
“If you review SAC’s 13F filed May 15, it is interesting that two of the top three positions are index put options,” Laurelli said. “To me, that would explain a lot of the positive return in a negative environment.”
A put option gives the buyer the right to sell the underlying security at a predetermined price, and is often used by investors who expect the price of the underlying asset to decline.
Kenneth Griffin’s Citadel also had a strong month with its main investment funds, known as Kensington and Wellington, gaining 1.30 percent in June to finish the first half up 7.60 percent. Strong stock picking plus bets on energy and selected fixed-income securities helped fuel the gain, a person familiar with the Chicago-based firm said.
Citadel has been among a handful of funds that investors said might benefit when outside money leaving SAC is reinvested.
Those results compare with declines at other large hedge funds, according to early numbers. Greenlight’s flagship portfolio fell 1.1 percent in June while Third Point’s Partners fund fell 1.7 percent. Bridgewater’s All Weather fund was hit particularly hard, losing about 6 percent through the third week of June.
SAC’s strong results in June followed the latest round in the government’s insider trading probe.
In May, U.S. prosecutors sent a grand jury subpoena to Cohen seeking his testimony in connection with the investigation. Cohen indicated to authorities that he would assert his constitutional right not to testify and it is believed prosecutors never sought his testimony, said a person familiar with the inquiry.
SAC Capital has until the end of the year to return money to outside investors who requested their money back. Even with those returns, the firm will be managing at least $8 billion of Cohen’s personal fortune and that of his employees.
The firm is still expected to manage about $1 billion in outside capital, including $550 million with an affiliated reinsurance firm SAC Re.
(Reporting by Katya Wachtel and Matthew Goldstein- Additional reporting by Emily Flitter and Svea Herbst-Bayliss- Editing by Lisa Von Ahn and Leslie Adler)
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