Billionaire's decision to step back from trading and focus on running Point72 underlines redemption since SAC insider trading.
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Steve Cohen used to charter a yacht in the Mediterranean with friend and art dealer Larry Gagosian. But he never really switched off.
“We’d be in the middle of a wonderful dinner in Italy and he’d have to race back to the boat to trade,” said Gagosian, recalling how the hedge fund billionaire would have screens installed below deck to create a de facto trading floor.
“I said, Steve, I love you, and I love taking trips with you, but it’s not the most relaxing.”
However, after an investment career spanning almost half a century, Cohen, 68, announced this week he was stepping back from trading at Point72, the hedge fund he set up a decade ago, to focus on running the firm.
Point72, which manages around $35bn, rose from the ashes of an insider trading scandal at its predecessor SAC Capital that cost $1.8bn to settle, with Cohen subsequently barred for two years from managing external investors’ money.
As the firm has grown rapidly over the past few years, the relative size of Cohen’s trading book has shrunk — a letter to investors this week said it was less than 1 per cent of the firm’s overall portfolio.
“He believes his strategic guidance and intervention will have a greater impact” than his individual trading on the firm’s investment performance, the letter said.
Cohen has many other interests, ranging from ownership of his beloved New York Mets and philanthropy supporting veterans and children’s health to an art collection worth more than $1bn that includes works by Pablo Picasso, Jeff Koons and Alberto Giacometti. What distinguishes him as a collector is that he “is just as interested in seeing a new artist as going after a trophy”, said Gagosian, which is “not always the case”.
This week’s move underlines how Cohen is preparing Point72 to outlast him. The firm said he would be “taking a break from trading his own book”.
Born in 1956 and raised in Great Neck, New York, the third of seven siblings, Cohen credits playing poker at high school with teaching him “how to take risks”.
He began his investment career in 1978 trading options at brokerage Gruntal & Co before setting up SAC Capital in 1992, named after his initials.
The hedge fund industry was in its infancy and the early SAC was known for its cut and thrust atmosphere, juicy payouts for those who did well — and a disposable approach to talent.
Cohen was even known to fire people on the spot if they disappointed him, according to one person who used to work with him at SAC.
“Steve treated the business like a baseball team — if your shortstop is not performing then you trade him for someone else,” the person said. “There’s no personal relationship, it’s just business.”
Cohen surrounded himself with the top moneymakers but sitting close to him could be intimidating. He expected his employees to share his ferocious work ethic, quizzing them during Sunday meetings to prepare for market opening the following day.
“He is not an easy gentleman, he is not a wallflower,” said a second colleague from the SAC years. “He’s a very complicated individual but very smart, a very good trader and knows how to reinvent himself.”
Supporters of Cohen say his edge came from a seemingly instinctive ability to spot market patterns and, as the years rolled on, his experience.
“Whatever’s going on, he’s seen it all before . . . he has seen it and every iteration of it,” said the first person who worked with him.
From 1992 to 2013, SAC boasted annual returns of about 30 per cent, making it one of the world’s top performing hedge funds.
Investors clamoured for access, coughing up an annual management fee of roughly 3 per cent and up to an enormous 50 per cent performance fee, far higher than the industry standard “two and 20”.
Growing to manage more than $15bn at its peak, SAC’s returns seemed almost too good to be true. They were.
In 2013 a team of New York prosecutors led by US attorney Preet Bharara brought several charges against Cohen’s SAC Capital and affiliated firms. It alleged that insider trading at SAC was “substantial, pervasive and on a scale without known precedent in the hedge fund industry”.
They said numerous portfolio managers and research analysts obtained “material, non-public information” from “dozens” of listed companies and then traded on that inside information.
SAC incentivised portfolio managers or analysts that brought “high conviction” trading ideas to Cohen where they had an “edge” over the competition, the indictment said, with portfolio managers and analysts encouraged to pursue “industry contact networks” — but without effective controls to make sure they were not receiving inside information.
SAC Capital pleaded guilty in a $1.8bn settlement, the largest ever for insider trading. But prosecutors ultimately stopped short of charging Cohen — who did not admit personal fault — with criminal or civil insider trading charges, believing they did not have enough evidence.
For a time he appeared to retrench, managing his own money in Point72, which was set up as a family office.
By 2018 he had opened it up to external investors and after a difficult first year when the fund was flat, Point72 began, in Cohen’s customary baseball lingo, “hitting doubles” — gaining more than 10 per cent in every year except 2021.
Those who know him say that as the hedge fund industry has become more institutional and straight laced, Cohen has also mellowed with age.
But he still has his quirks. Ahead of one visit to the London office, the fridge was stocked with Dr Pepper, Skittles and Post-it notes warning “do not touch”, according to a person familiar with the situation, while the local team made sure the air conditioning was suitably cool for the boss.
Point72 employs 2,800 people, runs more than double the assets of SAC at its peak and marks one of the hedge fund industry’s greatest redemption stories.
In an unforgiving industry, Cohen is notable for his longevity, and regarded as a pioneer of the so-called multi-manager hedge fund approach, alongside Citadel’s Ken Griffin and Millennium Management’s Izzy Englander.
Like Pete Rose, the baseball player whose legacy was later soured by sports gambling, Cohen’s brush with the law means even the “best hitter ever” has a “little asterisk” next to his name, said one rival hedge fund manager who knows him.
But they added: “Stevie can still have another chapter.”
Cohen and Point72 declined to comment.
For Gagosian, his friend’s shift from player to coach may mean their holidays can resume.
“We stopped chartering boats together,” he said. “Maybe now we’ll do it again.”
- Costas Mourselas and Harriet Agnew
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