Hedge Funds Effected By SAC Redemptions
Boris Onefater, who runs hedge fund due diligence and advisory firm Constellation Investment Consulting, said some managers use sub-advisers to bolster areas of trading where a firm is either weak or looking to supplement. He said it is too soon to predict what SAC Capital will do, noting Cohen could keep his money with the sub-advisers performance has been solid.
It is not known how much of SAC Capital’s money is managed by Scopus and Adams Hill.
Of the two firms, Scopus is older and larger. The firm was launched in 1998 by trader Alexander Mitchell, roughly six years after Cohen opened SAC Capital with just $25 million. Mitchell had previously worked for hedge fund veteran Michael Steinhardt, according to two people familiar with Mitchell.
Scopus, which regulatory documents reveal has about $2.8 billion in assets, manages SAC Capital’s funds in a separate account from the rest of its investors’ money, according to a person who knows Mitchell.
In regulatory filings, Scopus said it provides investment advice to a single “managed account” and that under an agreement with the unnamed fund it invests “in most, if not all, of the same securities.”
Scopus, like SAC Capital, charges investors some of the highest fees in the industry. The firm keeps between 25 to 40 percent of all profits on top of a 1 percent to 2 percent asset management fee, according to regulatory documents.
Cohen’s fund charges clients a 3 percent asset management fee in addition to receiving 50 percent of all trading profits. SAC Capital’s fee structure has enabled Cohen to build a workforce of 950 employees, one of the largest in the industry.
Adams Hill, meanwhile, is a smaller shop. The Westport, Conn. firm was founded just last year by Andrew Schwartz, a longtime equity portfolio manager at SAC Capital. Schwartz took three SAC Capital colleagues with him to his new firm, which manages about $450 million in assets, according to regulatory filings.
Wall Street firms that provide prime brokerage services to hedge fund SAC Capital, such as, Goldman Sachs, Morgan Stanley and Citigroup among others, collectively reap about $500 million in trading commissions each year, said several people familiar with the hedge fund industry.
There is an expectation those commissions would drop as a smaller SAC Capital would trade less.
Read more: Bloomberg