Wall Street was in suspense over what would become of SAC Capital Advisors, as the embattled hedge fund faced a regularly scheduled quarterly deadline for investors to ask for their money back. For most of Monday, a report about the investor exodus was the most-viewed article on Bloomberg data terminals. With SAC facing an intensifying insider trading investigation, a major reason for the concern on Wall Street is a commercial one.
For brokerage firms, SAC has been a source of billions of dollars in revenues over the years, DealBook’s Peter Lattman writes. Several executives, citing client confidentiality, said the prospect of a severely diminished SAC, the hedge fund giant founded by Steven A. Cohen, would hurt their bottom line. “This is going to have a significant impact to the Street, full stop,†said a senior executive at a brokerage firm that counts SAC as one of its largest clients. “It’s like that line in ‘Bonfire of the Vanities’: a lot of golden little crumbs have fallen off of SAC, and now it looks like there will be less of them.â€
SAC employees, and the brokers and stock salesmen that service the firm, are expecting outside investors to take back several billion dollars by the deadline, Mr. Lattman reports. “Combined with the $1.7 billion that outside investors took out earlier this year, the withdrawals could leave SAC and Mr. Cohen with only about $1 billion of other people’s money. The fund could announce to its clients as soon as Tuesday the amount of money that investors asked to withdraw.â€
BEFORE THE SAC CASE  | Trades by Raj Rajaratnam’s younger brother in a technology stock nearly seven years ago may have put SAC on regulators’ radar, government documents show, Anita Raghavan writes in DealBook. SAC is the biggest hedge fund to become the focus of a government inquiry since the Galleon Group, Mr. Rajaratnam’s old firm.
“In the course of investigating Sedna Capital, the $80 million fund of Mr. Rajaratnam’s younger brother, Rengan, over accusations of ‘cherry picking,’ regulators found some communications between Rengan and an SAC trader who is no longer with the firm. ‘Cherry picking’ is when an asset manager reserves his winning trades for one fund, typically a friends and family fund,†Ms. Raghavan writes. “A court filing made public on Monday indicates that Rengan Rajaratnam is in talks with prosecutors over a possible plea agreement.â€
THIS TIME, WALL STREET IS THE HOME BUYER  | Home prices in some of the nation’s most depressed markets have been heating up. But unlike the last housing boom, the buyers this time are Wall Street investors, Nathaniel Popper writes in DealBook. “The influx has been so great, and the resulting price gains so big, that ordinary buyers are feeling squeezed out. Some are already wondering if prices will slump anew if the big money stops flowing.†Suzanne Mistretta, an analyst at Fitch Ratings, said: “The question is how much the change in prices really reflects market demand, rather than one-off market shifts that may not be around in a couple years.â€
Wall Street played a major role in the last housing boom by providing easy financing. Now, firms like the Blackstone Group and Colony Capital, an investment firm based in Los Angeles, have become big landlords on Main Street. Such firms are buying thousands of homes and renting them out, with the possibility of unloading them when prices rise far enough.
ON THE AGENDA Â |Â The Bloomberg Hedge Funds Summit, with panels of industry professionals, takes place in New York. Dollar General reports earnings before the market opens. Data on international trade in April is out at 8:30 a.m. Sergio Ermotti, chief executive of UBS, is on CNBC at 3 p.m. Anshu Jain, co-chief executive of Deutsche Bank, is on CNBC at 3:10 p.m.
A TRADER’S TALE OF EXCESS  | Turney Duff, a former stock trader and recovering cocaine user who once worked for Raj Rajaratnam of the disgraced Galleon Group hedge fund, now lives in comparatively humble environs, in a modest split-level house in a sleepy Long Island neighborhood, DealBook’s Peter Lattman writes. He traces his descent in “The Buy Side,†an industry tell-all set for publication on Tuesday that illuminates the world at the center of insider trading scandals.
“None of it surprises me,†Mr. Duff said, referring to the dozens of indictments of his onetime peers. “I liken it to the steroid era in Major League Baseball; it wasn’t about right and wrong but about getting an edge in a game where the stakes were huge.â€
Continental Grain to Walk Away From Smithfield  | The Continental Grain Company said it had chosen to exit its position of roughly 6 percent in Smithfield Foods and would not challenge the pork company’s planned deal with Shuanghui International. DealBook »
Sprint Says Dish’s Bid for Clearwire Violates Delaware Law  | In a letter to Clearwire’s board, Sprint Nextel said Dish Network’s tender offer of $4.40 a share was not “actionable,†since it broke an existing shareholder agreement at the wireless network operator. DealBook »
For Vodafone, Renewed Interest in German Operator  | The Vodafone Group “has revived its evaluation of a potential takeover†of the German cable operator Kabel Deutschland Holding, The Wall Street Journal reports, citing unidentified people familiar with the matter. WALL STREET JOURNAL
McGraw Hill Financial to Raise Stake in Indian Credit Ratings Agency  | McGraw Hill Financial said late on Sunday that it would buy an additional 22 percent stake in Crisil Ltd., an Indian credit ratings agency, for $336.3 million. DealBook »
American Realty to Buy Properties From GE Capital  | American Realty Capital Trust IV has agreed to buy 986 retail properties from GE Capital, a portfolio that the real estate investment trust said was worth $1.45 billion. DealBook »
Glencore Copper Mines Said to Draw Interest From Asia  | “Two companies linked to Chinese state-backed groups are weighing rival bids for Glencore Xstrata P.L.C.’s roughly $5 billion worth of copper mines in Peru,†Reuters reports, citing unidentified people familiar with the matter. REUTERS
Firms Singled Out for More Oversight  | The American International Group, Prudential Financial and GE Capital were designated systemically important by the Financial Stability Oversight Council, meaning they might be subject to increased supervision, Bloomberg News reports. BLOOMBERG NEWS
Mutual Funds Stung by Bond Losses  | The Financial Times reports: “Every one of the most popular class of U.S. mutual funds investing in bonds lost money in May, highlighting the risks for investors as interest rates rise.†FINANCIAL TIMES
Lawmakers Developing Plan to End Fannie and Freddie  | The proposed legislation could be introduced this month. BLOOMBERG NEWS
Former JPMorgan Trader Starts Hedge Fund  | Deepak Gulati, a former head of global equity proprietary trading at JPMorgan Chase, raised about $300 million for a hedge fund, Bloomberg News reports, citing two unidentified people with knowledge of the matter. BLOOMBERG NEWS
Billabong Shares Fall as Takeover Talks End  | Sycamore Partners Management and Altamont Capital are no longer in talks to buy the Australian surfwear company Billabong and have begun discussions over refinancing and asset sales instead. Billabong “lost about half of its stock market value†on the development, Bloomberg News reports. BLOOMBERG NEWS
Calpers to Sell Stake in Carlyle Group  | The California Public Employees’ Retirement System, known as Calpers, plans to sell its 4 percent stake in the Carlyle Group, an investment valued at $373.3 million as of the end of the day Monday, Reuters reports. REUTERS
Ackman to Reduce Stake in Canadian Pacific  | William A. Ackman’s Pershing Square Capital Management plans to sell shares in Canadian Pacific Railway after a significant rise in the stock price, Bloomberg News reports. BLOOMBERG NEWS
Investor Returns, With Bold Bet on Greece  | Paul Kazarian, who made his name years ago as the founder of Japonica Partners, disclosed plans to buy up to $3.8 billion of Greek government bonds. WALL STREET JOURNAL
Zynga Lays Off 18% of Work Force  | “None of us ever expected to face a day like today, especially when so much of our culture has been about growth,†Mark J. Pincus, the chief executive, told Zynga employees in a blog post. NEW YORK TIMES BITS
Advertising on Social Media Intersects With Free Speech  | “As social media sites pursue advertising in a bid for new revenue, they are finding that they must simultaneously create a safe space for the advertisers they attract,†The New York Times writes. NEW YORK TIMES
Qingdao Port Said to Seek Up to $300 Million in Hong Kong I.P.O. Â |Â
WALL STREET JOURNAL
Relationship Science Attracts $30 Million  | Relationship Science, a networking service that is popular among the Wall Street set, raised $30 million in financing, Fortune reports. FORTUNE
Technology Entrepreneur Looks to Raise $10 Million Fund  | Jason Calacanis said investors in his new fund include David Sacks, the founder of Yammer, according to peHUB. PEHUB
The Long Road Ahead for Tesla  | Tesla’s chief executive, Elon Musk, needs to sell 540,000 vehicles a year for the company to be worth $43 billion by 2022, Antony Currie of Reuters Breakingviews argues. REUTERS BREAKINGVIEWS
G.M. to Replace Heinz in the S.&P. 500  | After market close on Thursday, G.M. will replace H.J. Heinz in Standard & Poor’s 100- and 500-stock indexes, amid the automaker’s continued efforts to repay the federal government for its taxpayer-financed bailout. DealBook »
The S.E.C. Is ‘Bringin’ Sexy Back’ to Accounting Investigations  | In the past, the Securities and Exchange Commission relied mainly on the market to flag accounting problems at companies that would lead to an investigation. Now, it is devising new programs to be more proactive, Peter J. Henning writes in the White Collar Watch column. DealBook »
No Easy Fix for Insider Trading  | James Surowiecki, in his column in The New Yorker, argues for faster disclosures of material information as a means of discouraging insider trading. The proposal, however, has drawn skepticism. DealBook »
Abe of Japan Said to Urge New Strategy for Public Pensions  | Reuters reports: “Japan’s government is set to urge the nation’s public pension funds â€" a pool of over $2 trillion â€" to increase their investment in equities and overseas assets as part of a growth strategy being readied by Prime Minister Shinzo Abe, according to people with knowledge of the policy shift.†REUTERS
Yen Move Presents Challenge for Abe  | “Less than a month after the yen breached 100 to the dollar, celebrated as a milestone for this export-loving economy, the yen is back on the wrong side of that symbolic threshold,†The New York Times writes. NEW YORK TIMES
