Over the last few months hardly a day has gone by without some news story about SAC Capital. It seems that journalists around the globe having been filing stories en masse about everything and anything having to do with the government’s case, Steve Cohen’s art collection and his recent real estate acquisitions. Last week the papers were filled with stories about a recent benefit he had at his Hampton’s estate. The press clearly is in love with all things SAC and its founder.
However, now that the issue has finally come to head, the question is what if any effect will the indictment of SAC have on the hedge fund industry. I will sum it up in one word – nothing. Sure an enormous amount of ink has been spilled over the recent news of the indictment of the firm and this week’s indictment of another person involved in the matter but these actions by the U.S. Attorney’s office will have little immediate or lasting effect on the hedge fund industry as a whole. After all the news last week was not really news and more importantly the industry is bigger than SAC Capital, Steve Cohen and any and all those who have already pleaded guilty or are awaiting trial on insider trading charges. The reality is investors need hedge funds.
Capital is not leaving in droves. Funds are still being launched and the capital markets around the globe are still operating as business as usual. And this dear readers is how it should be. No one fund or firm should be so mighty and powerful that it has the potential to wreak havoc on the markets or the industry. The industry survived Long Term Capital Management, Bayou and others and it will survive this. Mark my words hedge funds and those who manage them and invest in them are here to stay. As long as investors need alpha, there will be managers who will try to provide it and because of that the future of the hedge fund industry is quite bright.