SAC Capital - How Do You Have Stellar Returns Year After Year Without Cheating?

By BankersAnonymous

I covered the mortgage bond side of SAC Capital in the early 2000s, and I remember half-kidding, half-probing my client about Steven A Cohen’s seeming inability to miss.  Back then Cohen’s SAC had put together a string of annual monster returns like no other hedge fund.[1]  Cohen’s SAC Capital was the Mark McGuire of stock trading, and we knew enough to think the home run records of 1998 looked mighty suspicious.

My client was one of the nicest and most straight-forward men I ever worked with, and his team of bond portfolio managers were really not the beating heart of SAC’s fund, which at its core was a high volume, stock-trading firm.

My client honorably defended his employer Cohen, marveling at his ability to stand in the middle of his trading floor in Stamford, CT and synthesize all the trading inputs and react unerringly with his ‘feel’ for the markets.

SAC was known then to produce an inordinate amount of volume on the NYSE for just one fund,[2] making Cohen’s fund the top equity client for a number of broker-dealers who earned extraordinarily high commissions on his stock trading.  The implication of high volume like this, at the time, was that a top client like SAC co