The Redemption Deluge Arrives: SAC Bracing For Massive $3.5 Billion In Withdrawals

There is little that has not been said about SAC on these pages in the past 4 years (most recently here). So let’s proceed straight to the incremental news:

Breaking: SAC Capital executives are preparing for estimated client withdrawals of $3.5 billion.

— Wall Street Journal (@WSJ) June 2, 2013

From the WSJ:

Executives of SAC Capital Advisors LP are bracing for what they have estimated could be $3.5 billion in withdrawals as a quarterly deadline approaches for clients of the hedge-fund giant to ask for their money back, according to people briefed on the matter.


The anticipated withdrawals, which the people described as preliminary estimates that were still in flux going into the weekend, would follow requested withdrawals of $1.7 billion by SAC clients in the first quarter.


If the estimates hold, the outflows would represent more than half of the firm’s remaining outside capital and would bring the total amount SAC investors have sought back this year to more than $5 billion. As of mid-May, the firm managed about $5.6 billion in outside money, out of a total of $14 billion in assets, according to details of its operations as described by SAC representatives to clients and others outside the firm.

In other words, the “information arbitrage” powerhouse that was SAC for over two decades, collecting 3 and 50 or so from outside clients, is finished. Going forward it will at best remain as a “family office”, managing its own friends and employees’ money, however as everyone knows, hedge fund managers make their money not on capital upside (because there is always downside no matter how good PM Ben Bernanke is at offsetting all systemic risk) but on the fees charged from outside clients.

In the meantime, with SAC’s regulatory gross leverage of over 3.0x, transforming SAC’s net assets of $13 billion into $44 billion in regulatory assets, this means that major unwinds are a-coming.

And as we highlighted last week, assuming pro rata liquidation, here are the stocks that will get hit the first, and the most: SAC’s top public equity holdings.

And here, once again purely for entertainment purposes, is cartoonish PR-magnet extraordinaire and straight-to-Netflix Wall Street 2 star, Anthony Scaramucci from December 2012:

I think the entire thing is overblown, that’s number one. Two, he’s an exceptional investor, he’s got a great reputation in the industry. He’s a philanthropist and great guy. Number three, since 2008 through 2012 they have the tightest insider trading protocol in the industry.  I am an enemy of witch hunts and political witch hunts, it’s very unfair and i think the story is overblown and people our country are innocent until proven guilty. He’s also let out a statement saying he’s in full cooperation with the government…. Skybridge likes to think about things carefully and sometimes be a contrarian.

… Such as “contrarianly” going with those who are about to be shut down. Well, Fund-of-Funds managers may provide absolutely zero value (aside from throwing great Vegas “conferences”, of course) but at least their comedy content is unmatched.

Fast forward to 3’40” into the clip:



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