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Analysis: Titan’s ambience for tiny supports seen behind the SAC exit

Tue Jan 8, 2013 5:26pm EST

BOSTON (Reuters) – Money manager Titan Advisors has motionless that bigger isn’t always better.

The firm, that manages about $3 billion on interest of grant supports and rich individuals, has been changeable some of a income it invests with roughly dual dozen sidestep supports divided from some incomparable supports into smaller ones, according to letters it has sent to investors.

One of a many notable moves was a welfare to lift a income from Steven A. Cohen’s SAC Capital Advisors during a time when a $14 billion sidestep comment is in a spotlight in an ongoing insider trade investigation.

The welfare by Titan, a supposed sidestep comment of funds, incited some heads on Wall Street given a firm’s founder, George Fox, is a crony of Cohen’s and his Port Chester, New York-based investment organisation is one of SAC Capital’s oldest outward investors.

But over a year ago, Titan began changeable some of a income it invests divided from incomparable supports into smaller ones.

Titan is in a routine of saving income from Bill Ackman’s $11 billion sidestep comment organisation Pershing Square Capital Management, and in 2011 pulled all of a income out of $34 billion Brevan Howard Asset Management, one of a world’s largest funds, according to a financier letters. Reuters reviewed 11 letters sent in a past dual years.

Titan recently allocated income to GS Gamma, a New York-based comment with reduction than $1 billion underneath management, and BHR Capital, also in New York, with roughly $1.5 billion in assets.

Titan, according to a chairman informed with a firm, had between $75 million and $100 million invested with SAC Capital.

Officials with Titan, who declined to comment, have not nonetheless sent investors a minute explaining their welfare to redeem from SAC Capital. The welfare to exit, that investors were told of in late December, came a few weeks after Mathew Martoma was charged with insider trade while operative for Cohen’s firm. He has pleaded not guilty.

Altogether, 7 stream and former SAC employees have been charged or endangered in a insider trade examine into sidestep supports and their sources of trade tips, and a organisation itself – along with a 56-year-old Cohen – has been sketch renewed scrutiny. Cohen has not been charged with any wrongdoing.

Over a past year, Titan has told investors it is endangered about a ability of vast sidestep funds, even ones it has invested with for a prolonged time, to continue outperforming a markets.

In a Mar minute reviewed by Reuters, Fox pronounced a organisation is “maintaining a welfare for smaller managers” given over time “bigger distance threatens performance.” He added: “A executive partial of ongoing due attention is seeking ourselves, ‘Are a best days forward for this manager?'”

Last year, SAC Capital’s flagship comment was adult 12 percent, compared with a scanty 3.17 percent benefit for a normal sidestep fund. But SAC Capital, that charges some of a top fees in a $2 trillion sidestep comment industry, lagged behind a 13.4 percent benefit posted by a SP 500 index.

Pershing Square also was adult 12 percent in 2012.

Officials with SAC Capital, Pershing Square and Brevan Howard declined to criticism on Titan’s move.

The emancipation from SAC Capital comes as Titan’s possess opening has been medium during best. Last year, a firm’s flagship comment of supports was adult 6.97 percent by a finish of November, pronounced a chairman informed with Titan. In 2011, a comment was mostly unchanged.

Titan would not be a initial income manager to remove an ardour for vast multi-billion dollar sidestep funds. The $242.7 billion California Public Employees Retirement System, one of a biggest grant supports in a world, has prolonged had a ambience for smaller, reduction obvious sidestep funds.

Some attention analysts have remarkable that as sidestep supports get bigger it becomes some-more formidable to beget a same kind of earnings they delivered when a supports initial launched and were smaller.

Some experts pronounced they suspicion a insider trade inspection might still have played a purpose in Titan’s SAC decision.

“On a face of it, it sounds like they were being really active in pulling out of SAC, yet there might have been other reasons during work too,” pronounced a chairman who advises sidestep comment investors and is informed with Titan Advisors.

Federal authorities left small doubt they were relocating significantly closer to Cohen when they arrested Martoma in Nov and charged him with regulating inside information to beget increase and equivocate waste totaling $276 million in shares of dual drug stocks, Elan Corp PLC and Wyeth, now owned by Pfizer.

Federal authorities pronounced Cohen, as owners of SAC Capital, sealed off on a trades, even yet a billionaire manager wasn’t charged with any wrongdoing.

Ever given SAC’s name initial arose in a insider trade examine several years ago, Fox has been constant to Cohen.

At a finish of 2010, Titan quit Loch Capital Management, one of 4 firms raided by sovereign authorities in Nov of that year, yet it stranded with SAC Capital even after a sidestep comment concurred removing a summons for information.

For now, Titan’s emancipation from SAC Capital does not seem to be environment off a run for a exits by outward investors, who comment for $6.3 billion of SAC’s income (the rest is owned by Cohen and other insiders, such as employees).

(Reporting By Svea Herbst-Bayliss; modifying by Matthew Goldstein, Martin Howell and Leslie Adler)

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