Weekend Economists: See the Kittehs! May24-27, 2013

[Demeter]

83. Blackstone notifies Cohen's SAC it intends to pull money

http://news.yahoo.com/blackstone-notifies-cohens-sac-intends-pull-money-pension-154556025.html

Billionaire hedge fund manager Steven A. Cohen is losing the financial support of Blackstone Group Inc, the largest outside investor in his embattled SAC Capital Advisors, which is yanking much of its client money, according to a letter reviewed by Reuters.

A pension consultant, in a May 21 letter to clients, said Blackstone has notified Cohen that it intends to "fully redeem" a significant portion of the roughly $550 million the investment firm has invested with the $15 billion hedge fund. The letter from pension consulting firm Russell Investments said Blackstone submitted its redemption notice to SAC Capital sometime before May 15 because of ongoing concerns about the insider trading investigation that continues to engulf Cohen's fund.

Blackstone's investment with SAC Capital is through several investment funds known as hedge fund of funds and also through separately managed accounts it maintains for clients. The decision to redeem from SAC Capital impacts only client money invested in its hedge fund of funds, according to the letter. It's not clear how much of the $550 million is in those hedge fund of funds and it is not clear what Blackstone is advising clients who have money in separately managed accounts that is invested with SAC Capital.

Russell did say in the address to its pension clients that Blackstone "expects to receive 100 percent of investors' capital by year-end." Russell, which manages $173 billion in assets and oversees a number of index funds, also provides advice to pensions and institutional investors on where to invest their dollars in hedge funds. The timing of Blackstone's request to withdraw money from SAC Capital is critical because it came before the hedge fund told investors on May 17 that its cooperation with federal authorities was no longer unconditional. Soon after, news broke that federal prosecutors had issued grand jury subpoenas earlier this month to Cohen and several of his top executives, seeking their testimony about insider trading at the hedge fund. The decision by Blackstone, which has invested with SAC Capital for at least a decade, is a big blow to the 56-year-old fund manager, who is widely regarded as one of the most successful traders of his generation. Blackstone - which manages about $46 billion in hedge fund investments for public pensions, foundations, corporations and wealthy individuals - is seen as something of a bellwether for other investors in the $2.2 trillion hedge fund industry because of its stature...Outside investors in SAC Capital like Blackstone, who account for roughly $6.75 billion of the $15 billion managed by Cohen, have until June 3 to decide whether to submit redemption notices for the second quarter. In the first quarter, outside investors notified Cohen they intend to withdraw about $1.7 billion of that $6.75 billion by year's end. People close to SAC Capital said Cohen, who has roughly $8 billion of his money invested in SAC Capital, is bracing for another large round of redemption requests. The speculation is growing in the hedge fund world that if Cohen gets another large round of redemption requests, he may opt to return all the outside money and convert SAC Capital into a family office — an unregistered firm that manages money just for himself and his friends and family. SAC Capital is one of the world's larger hedge funds with 1,000 employees.

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