Trader Fact File Steven Cohen

Steven Cohen is an American hedge fund manager who was ranked by Forbes at the 106th richest man in the world for 2014 and the 35th overall in the United States. He is the founder of Point72 Asset Management and S.A.C. Capital Advisors.

Cohen faced civil charges in 2013 for failing to prevent insider trading in S.A.C. Capital Advisors. He plead guilty to these violations, paid a $1.8 billion fine, and agreed to stop managing funds for clients until 2018. Still, he is known to maintain a net worth of $12.7 billion as of May this year.

Apart from his success in trading and asset management, Steven Cohen is also a noted art collector and philanthropist. He and his wife have donated huge sums to hospitals, particularly to their pediatric units. In April 2016, he committed $275 million to creating mental health centers for veterans nationwide. Their foundation, aptly called Steve & Alexandra Cohen Foundation, gave a grant of over $100,000 to the Bruce Museum of Arts and Sciences to support arts education. Cohen pledged $30 million towards the research for drug-based therapies for post-traumatic stress and brain injury, on top of the funding he provided through the New York University Langone Center for research on those conditions.

Career

Cohen credits his willingness to take risks to his love of poker, which he played extensively in high school. He graduated with a degree in economics from the Wharton School at the University of Pennsylvania where he opened a brokerage account with $1,000 through the help of a friend.

Cohen soon got a job in Wall Street as a junior trader in the options department at Gruntal & Co. Legend has it that he made $8,000 in profit on his very first day on the job then raking in $100,000 of profits a day, eventually managing a $75 million portfolio and a team of six traders.

In 1992, Cohen started his own company called S.A.C. Capital Partners with $20 million from his own pocket. The firm managed $14 billion in equity as of 2009.

Word through the grapevine is that his compensation amounted to $1 billion in 2005, double his $450 million salary from the previous year. In 2013, he joined the ranks of the Highest-Earning Hedge Fund Managers of Forbes. He was dubbed the “hedge fund king” in a Wall Street Journal article in 2006, ranking 94th in Time’s 100 list of most influential people the following year.

Facts

Cohen was implicated in an alleged insider trading scandal involving S.A.C. Capital’s ex-manager Mathew Martoma. He was not directly named in the 2012 indictment but was later on slapped a civil lawsuit because of supervisory oversight. Prior to this Cohen and his brother Donald were sued by his ex-wife Patricia for racketeering and insider trading, although the case was dismissed since the claims were based mostly on speculation and rumor. These fraud claims were revived in 2013 by the US Circuit Court of Appeals in New York, along with claims of racketeering and breach of fiduciary duty.

His other company, Point72 Asset Management, is an American family controlled investment company managing the assets of its founder and eligible employees. This company was established in 2014 and employs approximately a thousand people. It makes use mostly of big data research in its quantitative investing business.

Following the 2013 S.A.C. Capital scandal, Point72 Asset Management implemented a strict internal compliance program with a specialized surveillance unit composed of former FBI, CIA, and SEC investigators. This firm generated 15.5% in returns last year.

Cohen is also one of the most prominent art collectors to date, earning a spot in the Top 10 list of biggest-spending collectors since 2002. An estimated value of his collection in 2015 is at $1 billion. His tastes have evolved from Impressionist paintings to contemporary art and signature works from famous artists.

He also owns 7% of search engine Baidu and 5% of SSD design company OCZ Technology. In 2013, his New York penthouse was listed for sale at $98 million. He is also one of the minority owners of the New York Mets with his 4% stake in the baseball team.

Cohen is known to shy away from publicity but granted his first on-the-record interview to Daniel Strachman in 1999 for his book called Getting Started in Hedge Funds. He has been married twice, first to Patricia Finke and next to Alexandra Garcia, and serves on the Board of Trustees for Brown University and the Robin Hood Foundation.

Achievements

Cohen trades primarily in the equities market, holding an increasing number of stocks for longer periods of time compared to his earlier strategy of making rapid-fire trades. Prior to its legal battles, S.A.C. Capital was generating an average of 30% in annual returns for its investors for two decades.

S.A.C. Capital traded in huge volumes, accounting for 1-3% of the NYSE’s and NASDAQ’s daily trading activity. These comprised a minimum of 20 million shares traded per day, although the fund itself was highly secretive in its strategies.

During the tech boom in the 90s, Cohen was able to earn 70% returns in his portfolio. He shorted these same technology stocks in the 2000s and raked in roughly 70% from these trades as well. In 2007, he took a $76 million position in Equinix ahead of the company’s earnings release, which turned out positive and boosted the stock value by 32% in a month. In 2012, Cohen placed a $26 billion bet on Ardea Biosciences, which was later on acquired by AstraZeneca and increased his position to almost $40 million. Other big wins for Cohen’s firm included bets on Whole Foods, Barr Pharmaceuticals, and Global Crossing.

Cohen reportedly charges investors in his flagship fund about 45% of the profits, much higher than the industry average of 20% even for top hedge fund performers.

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Sources:

https://en.wikipedia.org/wiki/Steven_A._Cohen

http://www.investopedia.com/terms/s/steve-cohen.asp

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