Cohen Hedge Fund pleads not guilty; SAC Re's future reconsidered

July 27
3:34 PM 2013

SAC Capital, a hedge fund owned by billionaire investor Steven A. Cohen, pleaded not guilty to securities and wire fraud charges in federal court on Friday. The move was followed by a barrage of questions concerning the propects of SAC Re, SAC Capital's Bermuda-ased reinsurance unit.

Insurer regulators The Bermuda Monetary Authority and A.M. Best Co. stated they were currently keeping an eye on developments, following the charges filed against SAC Capital and its affiliates. The hedge fund, along with constituents, were charged with one count of wire fraud and four criminal counts of securities fraud.

SAC Re, which had US$567.8 million in assets by the end of last year, was given an excellent rating by A.M. Best. Industry experts however predicted dramatic decrease in customers for the insurer if the ratings company were to lower the unit's rating.

"Buyers of reinsurance from SAC Re will be on the phone with their brokers telling them to move out," stated independent industry consultant, Andrew Barile. Changing reinsurance companies would be relatively easy, according to experts, as the number of options in the industry continue to increase.

Investors for the hedge fund, currently worth US$14 billion, expressed hesitancy concerning their investments just weeks before the redemption deadline on August 16.

The criminal charges has painted a bleak picture for one of Wall Street's biggest hedge funds and could spell the end of Cohen's management career. 

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