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 its 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 drug-trial data. The secret information, authorities say, allowed SAC to earn profits and avoid losses totaling $276 million. For the first time in the government's multiyear investigation of improper trading at SAC, the charges link Steven A. Cohen, the fund's owner, to the questionable trades.
A spokesman for the Stamford, Conn.-based SAC said last week that Mr. Cohen, who has not been charged with any wrongdoing, is “confident that they have 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.â€
Hedge funds typically communicate with their investors via month-end performance 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 that might surround the fund.
It is not clear whether Mr. Cohen will participate in the 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 seen their money compound at about 30 percent annually over the last two decades - one of the best track records on Wall Street. Mr. Cohen is said to be worth $8.8 billion, according to Forbes magazine, which puts him at No. 40 on its list of the 400 wealthiest Americans.
Notable SAC investors include Blackstone Group, which has a large pool of money that it invests in outside hedge funds, and SkyBridge Capi tal. A Blackstone spokesman declined to comment; Anthony Scaramucci, the head of SkyBridge, could not immediately be reached for comment.
Like other hedge funds, there are restrictions on withdrawing money from SAC. Clients can redeem only 25 percent of their investment each quarter, and the next time they can request a withdrawal is in February.
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 gotten out of the business of running other people's money and have transitioned to “family offices,†meaning they just manage their own fortunes.
SAC's performance year-to-date has been solid, with its fund up 10 percent. That is lower than the 14 percent return of the Standard & Poor's 500 index, but more than double hedge fund benchmarks. The firm has also in recent years strengthened its legal staff and compliance procedures, a topic that it will likely address on 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.
The case against Mr. Martoma marks the first time that prosecutors have connected Mr. Cohen to alleged improper trading. Prosecutors say that Mr. Martoma and Mr. Cohen worked together buying and selling the shares of the drugmakers Elan and Wyeth, which were jointly developing a promising new Alzheimer's drug. While they charge Mr. Martoma of trading in Elan and Wyeth while armed with secret data about clinical trials for the drug, there is no allegation that Mr. Cohen was in possession of any nonpublic information.
News of the co nference call was earlier reported by Bloomberg News.
