Pursuing criminal claims under that theory would be ďextremely difficultĒ and ďa stretch beyond elasticity,Ē Frenkel said.
The SAC investors said they are waiting to hear what the firm will say about the latest charges before deciding if they want to pull their money. One investor said itís now becoming increasingly difficult for him to justify an investment in SAC to his clients.
Still, the fund has one of the best track records in the industry. While SAC Capital charges the highest fees in the industry, with 3 percent of assets and as much as 50 percent of profits, Cohen has produced average annual returns of 30 percent since starting two decades ago. Heís had just one money-losing year, 2008, when his main fund tumbled 19 percent.
This year the $9 billion flagship fund has returned about 10 percent through October, according to a person briefed on the returns, compared with the average 2.7 percent gain posted by rival stock hedge funds, according to data compiled by Bloomberg. The Standard & Poorís 500 Index of large U.S. companies climbed 14 percent, including dividends.
SACís portfolio is in easy-to-sell stocks and it holds few large investments, so outside clients, who make up about 40 percent of the firmís assets, could get their money back quickly. As of the end of September, SAC Capitalís biggest U.S. stock position was a $340 million holding in Sirius XM Radio Inc., which accounted for just 2.5 percent of the outstanding shares.
Clients can only pull 25 percent of their investment every quarter after giving 45 days notice, meaning it would take them a year to redeem in full. The next deadline for putting in a redemption notice is mid-February.
Another reason why investors may not want to pull their money immediately is that SAC Capital closed its main fund to new investments last year, so if clients flee, they may not be able to invest again.
SAC Capital also last year said it would indemnify clients against disgorgement of illegal profits and legal fees, according to a person familiar with the firm.
Cohen, who started SAC Capital in 1992 with 12 people and $25 million, made his name as a rapid-fire stock trader. The Stamford, Connecticut-based hedge fund today employs about 1,000 people working in offices from London to Hong Kong. Cohen, a billionaire and avid art collector who owns works by Damien Hirst, is an investor in the New York Mets.
SAC Capital first came into the probe-related headlines shortly after the October 2009 arrest of hedge-fund manager Raj Rajaratnam when former employee Richard Choo-Beng Lee was among those charged with insider trading at another firm. Six former or current SAC Capital employees have been tied to insider trading while working at the firm, including three who have pleaded guilty.
Cohen was deposed earlier this year by the SEC about trades made close to news that generated profits for his firm, people familiar with the matter said in June. Last year, prosecutors said they were looking at the trading account run by Cohen.
The increased scrutiny didnít deter investors. Cohenís main fund saw net deposits last year before he closed it, people with knowledge of the matter said at the time.