After October's "bloodbath across all strategies" resulted in the second-worst monthly hedge fund performance of the decade, many in the 2-and-20 crowd are bracing for the industry's worsening capital bleed to accelerate on Thursday as LPs scramble to request redemptions ahead of Thursday's deadline to get their money back before the end of the year. But as overpaid hedgies' paranoia about a feared culling of the herd reaches a fever pitch, one of the industry's most infamous figures isn't doing his competitors any favors.
During a talk at the 92nd Street Y on the Upper East Side of Manhattan on Thursday, former SAC Capital founder Steve Cohen revealed that he had successfully raised $5 billion in outside money since opening Stamford Harbor Capital (Cohen's new fund, which opened to outside capital earlier this year after a temporary ban on Cohen running outside money was lifted). Cohen raised this money at a time when redemptions for the industry as a whole had accelerated through the end of Q3.
While most funds have been struggling to keep the money that they already have, Cohen said he didn't have to try hard to raise the money.
Here's the FT:
"It was actually not hard," Mr Cohen told a sold-out audience of his fund-raising at a 92nd Street Y event, which included former New Jersey governor Chris Christie.
"I did only 10 or 15 meetings, it was really easy," he said. "I made one trip overseas to see one client and my staff did an amazing job and we raised probably $5bn."
Cohen said he's happy to be taking outside money again, because it has allowed his firm to grow.
"It never bothered me not having other people’s money because I had a lot of my own money" but "frankly we couldn’t grow."
But for any LPs who might have been in the room (Chris Christie reportedly attended the event), Cohen shared his market outlook, which was notably similar to that of his Fairfield County neighbor Bridgewater.
Like a growing number of funds, Cohen believe the US economy is "late cycle" and that a bear market could arrive some time within the next two years.
Mr Cohen said he sees the US economy as “late cycle”, and predicts a possible bear market in the next year and a half to two years.
"I’m not comfortable, I’m not uncomfortable, I’m somewhere in the middle," he said.
"I don’t think returns over the next two years are going to be very good. If the market hangs in there, there’s just going to be marginal returns."
According to the investing theory that helps hedge funds justify their existence, hedge fund investors see the most benefit during down turns, when their sophisticated stock pickers can more easily choose outperformers, allowing their ability to pick winning stocks to truly shine. In other words, as Cohen implied, everybody who is pulling their money from hedge funds is merely succumbing to panic. Now's the time to get in before the market's bottom falls out.
In what sounded like an attempt to check Cohen's ego, his interviewer jokingly pointed out during the talk that Cohen "isn't Warren Buffett."
"And Warren Buffett's not me," he replied.