“It’s Stevie on the line I have to take this” I heard. The main course had just arrived, an expensive lobster ordered by my client at the hedge fund SAC. He had been looking forward to lobster at his favourite midtown Manhattan restaurant but suddenly a call had come from the SAC offices and Cohen was on the line! Out he dashed into a private space to conduct the rest of the call.

It was 2006/2007 and I was a sell-side stock research analyst on a New York marketing trip and doing the rounds of midtown Manhattan as usual. Lots of day traders but occasionally you would get to meet one of the more fundamental hedge funds typically a “Tiger Cub” like a Viking or a Lone Pine. Even though my meetings at these latter firms were with senior portfolio managers (PM) with billion-dollar positions in stocks I covered, these meetings were allowed but never encouraged.

We don’t care about Viking or Lone Pine, they don’t trade enough my head of research used to lecture me. But one hedge fund everyone cared about was SAC Capital Advisors.

I realized just how much when I did my first marketing trip to New York a few years earlier and I went to my first ever meeting with SAC in their Connecticut offices that were immortalized in the TV series Billions over a decade later. When I met my senior sales colleague in the lobby of SAC he was armed with a tray of Starbucks coffees. None for me but as he signed me in he gave one to the assistant at the desk and off we went.

I was surprised, shocked, and a little in awe by the precision with which he knew how everyone at SAC from the assistants to the analysts, traders, and PMs took their coffees and teas, so I asked him on the way back to Manhattan if this was standard procedure with his clients. He glanced over at me and said “I have other clients but I only really care about SAC”. In those days no one cared about titles and he happened to be a director but because he was the SAC salesman he got paid more than any of the managing directors on the sales desk.

Fast forward back to my 2006/2007 lunch with SAC and we had just been given guidelines on client entertainment so when my friend and client at SAC said he was going to order the lobster that was the most expensive thing on the menu I got nervous. After all my client was not even a PM running his very own pod (designated amount of capital/trading book). He was just a senior analyst on an average size “pod”.

Luckily illustrating the profile of SAC, not only was the lunch attended by my sales colleague selling European stocks into SAC but also the client relationship manager for SAC across our whole firm (Credit Suisse First Boston). Noticing my slight caution the SAC global account manager laughed and said “No need to worry, the US equities business will pick up the tab on this one”.

When my client returned to our lunch he said to us “Stevie was interested in one of our positions and he couldn’t get hold of my boss”. Memories of this come back every so often. The first time was reading Sheelah Kolhatkar’s brilliant 2017 book “Black Edge: Inside Information, Dirty Money, and the Quest to Bring Down the Most Wanted Man on Wall Street”. This book is excellent around the theme in its title albeit less good at explaining the “pod shop” business model beyond it or the other skills that underpinned an amazing 30% returns per annum net of fees track record for Cohen over two decades - once crowned the best trader on Wall Street.

There is no doubt SAC would curry favours with Wall Street banks given they were such a huge client. But much of it was subtle and not the Black Edge but just about having quicker access to public information or getting invited to management meetings that other hedge funds rarely did. Getting a sense of market expectations around quarterly earnings and then trying to ask a CFO a dozen times in different meetings and conferences questions to get insights was bread and better training for the SAC analysts. Of course, CEOs and CFOs were careful what they said so it became a game of poker.

There is much written about the growth of multi-strategy hedge funds (that invest across multiple asset classes) and within this the multi-manager hedge funds, which have lots of discrete “pods” of traders allocated capital by a central team. Most of the headlines unsurprisingly focus on Citadel and Millennium which today are the biggest. But most people forget that there was a time when SAC was as big as they come. Go back to 2006/2007 and no other hedge fund was as important to the sell side as SAC. In 2007 SAC had $17bn of assets under management and 1,200 employees.

I was having lunch with someone in the management team of one of the big pod shops last year and he said to me that “not every star PM wants to work for Citadel and have Ken Griffin call you late at night when you are tucking your kids into bed and ask you to justify your stock trades”. Made me think back to 2006/2007 and Stevie Cohen interrupting our client lunch.

The Feds almost took down Cohen in 2013. But he survived with the firm pleading guilty to criminal charges, taking a $1.8bn fine and sitting it out as a family office for a few years. SAC was reincarnated as Point72 and started to take in external capital in 2018.

Returns have not been as stellar as the good old days of SAC with the quarterly earnings, newsflow driven edge perhaps less sharp!

In particular, they significantly lagged Citadel which through the combination of its successful expansion into commodities and its tight structured approach to risk management has been the standout performer in the multi-manager space.

But as news comes that Stevie Cohen is finally stepping back from day-to-day investing to focus on management and mentoring it is worth remembering how big SAC was and how amazing its revival has been given its near-death experience.

Today Point72 is the 3rd largest of the pod shop firms and paced well ahead of the likes of Balyasny and ExodusPoint. Citadel and Millennium may be twice as large but with $35bn of assets under management (this includes raising $20bn of external capital since 2018), 2,800 staff, and 185 different pods Point72 has done well.

In 2012 U.S. Attorney for the Southern District of New York Preet Bharara was featured on the cover of Time magazine in a piece entitled "This Man is Busting Wall Street" for his office's prosecutions of insider trading and other financial fraud on Wall Street. The following year he went after the original pod shop king Cohen.

Fast forward a decade and Cohen is back bigger than ever and buying the New York Mets along the way. It feels like Bharara won the battle but lost the war!