The world's most anticlimactic, yet overexpected, news has finally arrived. Reuters reports that Senator Chuck Grassley is investigating possible insider trading at SAC Capital Advisors LLP. Possible. LOL. And so it begins: "The Financial Industry Regulatory Authority last week provided Senate Judiciary Committee head Charles Grassley with about 20 instances of suspicious trading at the hedge fund, a spokeswoman for the senator confirmed on Saturday. Grassley had asked Finra in April for information on any such trading at Steven Cohen's $13 billion hedge fund...It was not clear if the trades had been referred to the Securities and Exchange Commission's enforcement staff, and authorities have not alleged wrongdoing by SAC or Cohen. Court filings also show prosecutors are investigating trade accounts at SAC, including one tied to Cohen, SAC Capital's founder. SAC representatives and congressional investigators met in Washington on May 10 to discuss possible suspicious trades, according to the Wall Street Journal, which earlier reported Grassley's receipt of information from Finra." So even once it is finally uncovered that Cohen's billions in personal wealth have been allegedly accumulated after years of information arbitrage, and we get yet another confirmation that hedge funds only make money through economies of scale, but mostly size (until the implode), or simple insider trading, we are supposed to remember that Cohen is a great humanitarian at heart, and has spent a few million of his allegedly ill-gotten gains for civic pursuits: "Also at the meeting, SAC Capital's
Washington-based policy adviser Michael Sullivan cited Cohen's
"civic-minded interest" in purchasing a stake in the New York Mets
baseball team, the report said." Last but not least, SEC heart SAC because with it gone, liquidity (and volume) on the NYSE would plunge by another 15% (and likely much more) in yet another confirmation that fair and efficient US capital markets are nothing but a farce. "At the meeting, SAC representatives suggested the investigators go easy on the hedge fund, saying it has internal procedures to track down and prevent illegal trading, according to the Wall Street Journal report."
And elsewhere, it is time to call off the Gerson Lehrman IPO as the "expert network" world, first exposed by Zero Hedge two years ago (here, here and here) to be nothing more than an legitimate and organized scheme to trade on inside information, falls apart.
From the CFA Institute blog:
Given the value of one’s reputation to long-term professional
success, many on Wall Street are now reconsidering their association
with expert networks. The New York Times has reported
that both buy- and sell-side firms, including Millennium Partners,
Och-Ziff Capital Management, Credit Suisse, and Morgan Stanley have
either stopped using or are adjusting their policies regarding expert
consultants. According to Integrity Research, “usage by financial clients is reportedly down 40-60%,” leading
one to wonder if additional Wall Street firms will distance themselves
given fallout from the large number of insider-trading indictments
related to expert networks.
It is not just the firms using expert consultants that are beginning
to worry about their reputations. Michael Lynch, a consultant working
through the Gerson Lehrman Group, recently commented on the company’s blog that
he may consider withdrawing his consultant services if the
expert-network industry cannot improve its overall image. Lynch noted
that the hourly rate he earns cannot replace the loss of personal
reputation through guilt by association with those who are simply
peddling inside information.
So with hedge funds now having absolutely no informational advantage to the common person, and even idea dinners being bugger by the SEC, what is the point of giving someone 2 and 20 again? While in the past it was merely a fee to compensate the HF manager for the risk of procuring and trading on inside information, with that avenue now largely shut expect to see substantial flows out of the fast money arena and into plain vanilla funds, coupled with significant hedge fund "consolidation" and "synergies"... Perhaps it is time to short all those SoHo lofts after all?