Steve Cohen's New Fund Falls Flat, Posts Paltry 1% Return During First Year Of Trading

Limited partners who had been hoping that Steven Cohen's triumphant comeback would mark a return to the halcyon days of 30%+ P&Ls have been deeply disappointed.

According to Bloomberg, the hedge fund titan who opened his Point72 Capital Management to outside investors earlier this year following the lifting of a four-year ban from managing outside money notched a comparatively piddling 1% return during his first year back (Cohen had been managing his own money through a family office during the ban).


Steve Cohen

To be sure, Cohen at least managed to put up positive numbers, which is more than almost every other hedge fund can say (the industry recorded an average loss of 6.7% last year). But Cohen notably found his firm excluded from a group of elite computerized funds - Bridgewater, Renaissance and DE Shaw - which posted outsized returns that were well above the S&P 500's 4.4% drop. Bridgewater's flagship Pure Alpha fund notched a stunning 14.6% return, even after founder Ray Dalio warned in January that anybody holding cash "would be feeling pretty stupid" (Dalio clearly changed his view at some point, though he neglected to inform the public).

The fund accrued most of its losses during October and November, suggesting that Cohen was caught wrong-footed by the return of two-way volatility during Q4.

But by the end of 2018, Point72 had made less than 1 percent for investors, according to people familiar with the matter. The fund, which started trading last spring, lost about 1 percent in October and 5 percent in November, which largely wiped out its gains for the year.

As we've previously noted, Cohen endured one of his worst months ever in December (after his firm was up 7% at the end of the first half).

Point72's losses added to the ignominy of a scandal-ridden year for the former fund manager: A former employee sued Cohen and his firm, alleging that his firm's culture was "hostile to women". he firm also suffered from the departure in late 2017 of his firm's top trader.  Some investors also reportedly balked at Cohen's plans to impose a three-year lockup agreement on his LPs.

But Cohen's wasn't the only hedge fund mega-launch to fall flat:

It also wasn’t the only 2018 mega-launch to eke out modest early returns. Michael Gelband’s ExodusPoint Capital Management, which raised $8 billion - the most money ever for a hedge fund launch - made about 0.6 percent in the seven months since it started trading in June.

Fortunately for Cohen, legal decisions over the past few years have heightened the burden on prosecutors trying to prove insider trading charges. Though Cohen will no doubt face intense regulatory scrutiny for the rest of his career, this environment could favor a return of the "information arbitrage" strategy for which Cohen was once notorious.