Cohen Builds Out Family Office, Eyeing Possible Return

The former hedge fund firm turned family office is back with a London base, while a deal with the SEC "opens a path to raising outside capital" in the future.

Steven Cohen’s Point72 Asset Management may not return to running external money when its two-year ban by the US Securities and Exchange Commission (SEC) expires, according to the company.

Point72—now a family office—will focus on talent development and growing its internal assets, President Doug Haynes said in a London press briefing yesterday.

“We must continue to do business at the highest ethical and professional levels and in a way that is fully transparent to our regulators, counterparties, future employees, and potential future investors.”The company has reopened its London office and plans to hire a number of analysts, researchers, and portfolio managers to rebuild its European capability, Haynes added.

The office, on St James’ Square in the UK capital’s West End, has “six or seven” investment professionals working in it already, according to Haynes, with capacity for between 50 and 70.

The firm had not settled on a ratio of investment professionals to support staff, nor how quickly the vacancies would be filled, its president continued. “The amount will be dictated by the talent.”

The “door is open” to some former London staffers who wish to return.

Worldwide, Point72 now employs roughly 950 people, Haynes said, despite some exits while the firm was under investigation. A staff of that size is extremely unusual for family offices: Even multi-billion dollar operations employ roughly 100 people at the outside, according to Campden Research’s 2015 survey of 224 family offices, averaging $890 million each. 

Point72, under its previous guise as SAC Capital, shut down the London base in 2014 amid an insider trading investigation by US regulators.

The investigation ended with two-year ban for founder Cohen for “failing to supervise a former portfolio manager”—Mathew Martoma—“who engaged in insider trading while employed at his firm.” Cohen can’t oversee third-party funds, but can—and does—continue to trade his own book at Point72.

The SEC has instructed the organization to employ an independent consultant for periodic conduct reviews “to ensure compliance with securities laws.”

Haynes said yesterday that “survival was not good enough” for Cohen, and he wanted to see the firm perform strongly as a family office. In 2015, net of fees returns were roughly 15%, bringing assets under management to around $11 billion, he added.

In an internal memo to staff, seen by CIO, Cohen said Point72 would “remain industry leaders—not followers—in compliance.”

“We must continue to do business at the highest ethical and professional levels and in a way that is fully transparent to our regulators, counterparties, future employees, and potential future investors,” Cohen wrote.

He added that the resolution with the SEC “gives us certainty and opens a path to raising outside capital in the future if we believe that is in best interest of the firm.” But he too emphasized that returning to managing third-party money was not a certainty.

On the current structure of Point72, Haynes said yesterday that the company was keen to attract and retain top talent, paying a premium if necessary to help skilled portfolio managers build the teams they need.

He also said Point72 would support managers who wished to strike out on their own—and even hinted there were potential spin-off firms being “incubated” currently.

“It’s a natural evolution for some people to ‘graduate’ and run their own firm,” Haynes said. “Some portfolio managers are highly motivated by that—for those people we try to help them. We’ve had a handful of cases where we’ve done that: enabled managers to incubate before going outside.”

Haynes claimed that the family office was second only to Tiger Management in the number of former employees who had gone on to run funds elsewhere of $1 billion or more.

Related: Steven Cohen’s Point72 Loses President & SEC Head Talks Hedge Fund, Private Equity Regulation