Tags: Wall Street | SAC | Cohen | fund

Wall Street Risks Major Revenue Shortfall if SAC Capital Shrinks

By    |   Wednesday, 05 June 2013 01:53 PM

One party that is undoubtedly rooting for the beleaguered hedge fund firm SAC Capital Advisors is Wall Street.

That's because banks and brokerage firms have earned billions of dollars in revenue by lending the firm money, The New York Times reported. It borrows to leverage its positions, making winners more profitable.

SAC borrows about $3 for every dollar in the fund, according to the paper, or about $45 billion. The firm also doles out several hundred million dollars a year in stock trading commissions.

Editor's Note:
See the Disturbing Charts: 50% Unemployment, 90% Stock Market Crash, 100% Inflation

SAC, led by Steven Cohen, faced massive withdrawals by Monday's deadline for investors to pull some of their money out before the firm's legal woes potentially get worse. The firm is being investigated for insider trading and had been cooperating with the government. However, the firm recently told investors it was no longer cooperating fully and would not provide updates to investors, The Times noted.

The withdrawals could leave SAC with only about $1 billion of outside money, according to The Times.

Of the $15 billion that SAC managed as of Jan. 1, about $8 billion belonged to Cohen, $1 billion to his employees and $6 billion to outsiders. Outsiders withdrew $1.7 billion earlier this year.

Now there's talk SAC will return its outside money and just operate as a family office.

“This is going to have a significant impact to the Street, full stop,” a senior executive at a brokerage firm that serves SAC told The Times.

“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.”

Of course, SAC is in a lot thicker soup than the Wall Street firms that serve it.

"If it were up to me personally, I would stay in" the fund as an investor, a source who pulled out his investors' money late last year told CNNMoney.

"The decision is so difficult because he's a good manager. But as a fiduciary, I can't keep my clients money there as this investigation gets closer to Cohen."

Editor's Note: See the Disturbing Charts: 50% Unemployment, 90% Stock Market Crash, 100% Inflation

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One party that is undoubtedly rooting for the beleaguered hedge fund firm SAC Capital Advisors is Wall Street.
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2013-53-05
Wednesday, 05 June 2013 01:53 PM
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