The Morning Brief: SAC Gets Wells Notice; Ackman to Launch Listed Fund

November 29, 2012   Stephen Taub

SAC Capital’s embattled founder Steven Cohen told clients on a conference call on Wednesday that his $14 billion hedge fund firm received a Wells Notice from the Securities and Exchange Commission in connection with trading of the stocks of two pharmaceutical companies. This means the SEC staff may recommend bringing civil charges against the firm. Cohen himself told clients on the call he acted appropriately when he traded the stocks four years ago. Mathew Martoma, a former trader at SAC unit CR Intrinsic Investors, was arrested last week on insider trading charges relating to the two stocks. Prosecutors charge that the trading was illegal and netted $276 million and helped the firm avoid losses.

Bill Ackman’s Pershing Square Capital Management is raising money for a publicly-traded fund. The activist hedge fund manager received $2.2 billion in commitments for the fund, mostly from existing investors who are switching over. The fund is slated to be listed on the London Stock Exchange. Other managers who have created similar funds include Brevan Howard Asset Management and Third Point. These funds are often launched as a source of permanent capital, which is especially critical to an investor like Ackman, who makes only a handful of investments and then frequently takes activist positions.

Ken Griffin’s Citadel disclosed it owns 6.1 percent of Zillow, the online real estate company. The stock climbed 4.22 percent, to close at $26.40 on the news. This is near the bottom of its 52-week range of $21.22 to $46.86. In recent days, Zillow CEO Spencer Rascoff has been making positive pronouncements about the real estate market and the company’s recent purchase of HotPads. "We are clearly in a recovery," he said of the real estate market, while stressing it is not a strong rebound. "Home shoppers are back."

U.K.-based Stratton Street Capital LLP is passing around the hat to Asian investors to raise money for its $215 million Renminbi Bond Fund. The fund’s strategy is to buy dollar-denominated investment-grade bonds and use currency forwards to hedge investments in the Chinese yuan. The fund is up 23 percent this year.

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