SAC to Try to Reassure Investors

SAC to Try to Reassure Investors

SAC Capital Advisors, the hedge fund behemoth hit with a new insider trading charge last week, plans to hold a conference call on Wednesday morning to reassure investors and allay concerns related to the latest case.

Federal prosecutors have accused Mathew Martoma, a former SAC portfolio manager, with corrupting a doctor who provided him with confidential data on a drug trial. The secret information, authorities say, allowed SAC to earn millions and avoid losses totaling $ 276 million. For the first time in the government’s years of investigating SAC over improper trading, the charges link Steven A. Cohen, the fund’s owner, to questionable trades.

A spokesman for SAC, based in Stamford, Conn., said last week that Mr. Cohen, who has not been charged with any wrongdoing, was “confident” that the company “acted appropriately and will continue to cooperate with the government’s inquiry.” Charles A. Stillman, a lawyer for Mr. Martoma, said he expected his client to be “fully exonerated.”

Hedge funds typically communicate with their investors via monthly statements and quarterly letters addressing their performance. Conference calls are infrequently held, but are sometimes scheduled to discuss extraordinary market events or, as in this case, a controversy surrounding the fund.

It was not clear whether Mr. Cohen would participate in Wednesday’s call.

SAC manages about $ 14 billion, but only 40 percent of that comes from outside clients. The rest belongs to Mr. Cohen and his colleagues, who have experienced a return of about 30 percent annually over the last two decades — one of the best track records on Wall Street.

Like other hedge funds, there are restrictions on withdrawing money from SAC. Clients can redeem only 25 percent of their investment each quarter; the next time they can request a withdrawal will be in February. Notable SAC investors include the Blackstone Group, which has a large pool of money that it invests in outside hedge funds, and SkyBridge Capital.

Mr. Cohen, according to people close to him, remains committed to managing money for clients. In recent years, several other billionaire hedge fund managers, including George Soros, Stanley Druckenmiller and Chris Shumway, have stopped investing other people’s money.

SAC’s performance year to date has been solid, with its fund up 10 percent. In recent years, the firm strengthened its legal staff and compliance procedures, a topic most likely to be addressed in Wednesday’s call, a person familiar with the fund said.

Yet with Mr. Martoma’s arrest last week, the government has now charged five former employees with insider trading while working at the fund. Three have pleaded guilty; one settled civil charges with the Securities and Exchange Commission relating to trading in his personal account while at SAC.

Separately, an important government witness testified on Tuesday in an insider trading case brought against Anthony Chiasson, a former star analyst at SAC Capital who left to help found the hedge fund Level Global Investors. Spyridon Adondakis, known as Sam and a former analyst at Level Global, now defunct, said that an insider at Dell had given him secret financial data that he then passed along to his boss, Mr. Chiasson.

The case against Mr. Martoma is the first time that prosecutors have connected Mr. Cohen to possible improper trading. Prosecutors say that Mr. Martoma and Mr. Cohen worked together to buy and sell the shares of the drug makers Elan and Wyeth. While they charge Mr. Martoma with trading on secret data about clinical trials, there is no allegation that Mr. Cohen was in possession of any nonpublic information.

News of the conference call was reported earlier by Bloomberg News.


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