Low-Profile In Courage

Hedge-fund managers generally dodge the klieg light of the press, but word was going to get out about Steven Cohen’s 70 percent 1999 returns. And if the curious are curiouser, that’s just too bad: The secretive 43-year-old makes employees at SAC Capital Management in Stamford, Connecticut, sign confidentiality agreements said to be thicker than the Yellow Pages. Mystique is an alluring perfume, and those who could afford the price of admission should know the fund is now closed to new investors. Started in 1992, it has $1.3 billion in assets. Its worst year in the past five was 1996 – when it was up 42 percent.

For his labors, Cohen charges 50 percent of the profits on the funds he trades most aggressively – that’s more than double the 20 percent industry standard. (His staff of 150 charges anywhere from 20 to 35 percent.) Cohen, who toiled for fourteen years at Gruntal & Co. after graduating from the University of Pennsylvania, operates with all the attention deficit of a seasoned day trader – it’s not unusual for him to go long on a stock, sell it, and then short it minutes later. On a busy day, SAC accounts for more than one percent of the volume on both the nasdaq and the NYSE. A ranking of Wall Street’s highest-commission-generating accounts puts SAC at No. 19, a slot behind Soros Management. With brokerage firms in deep kowtow, Cohen isn’t shy about taking advantage: Every morning, SAC sends a fax to firms it trades through, listing stocks the firm is interested in. The unspoken message is, Give us the best information or we’ll take our business elsewhere. A sell-side analyst recalls getting twenty phone calls in one day for information on a single stock. “They hound you,” he says. “That’s just the way they are.”

Living Dangerously “Steve can hear the rhythm of the markets,” says a longtime SAC client. “When it comes to other things, he’s not as talented. I could see how I could tell him to meet me on such and such a corner, and he might have trouble getting there.” Not that Cohen doesn’t know a thing or two about having a blast: This past Christmas, he threw a seventies-themed office party at a Westchester yacht club. And his Greenwich neighbors have complained about his plans to turn fourteen acres of his $15 million estate into a mini Chelsea Piers, with an ice rink, a golf course, and an indoor basketball court.

Moneymaking Mantra Super-traders “are totally committed to their own particular style and demonstrate complete conviction when trading,” the sphinxlike manager wrote in a foreword to the book Trading to Win, by Dr. Ari Kiev, a psychiatrist on retainer at SAC.

Where He’s Headed In 2000 One of SAC’s principal traders, ex-Goldmanite Tom Grossman, is leaving to set up a $200 million emerging-market hedge fund in which SAC will be a signifcant investor. As for the U.S. equity market, Cohen believes it’s overvalued and highly dangerous for the novice. But his clients shouldn’t have to worry.

Low-Profile In Courage