KRS pulls from hedge fund Investors flee SAC amid an insider trading investigation By Kevin Wheatley, Published: June 6, 2013 10:29AM Blackstone Group, a global investment firm with more than half a billion dollars in Kentucky Retirement Systems assets, will pull most of its investment from a multi-billion-dollar hedge fund embroiled in an insider trading investigation. Blackstone has already redeemed KRS funds invested in SAC, KRS Chief Investment Officer T.J. Carlson said Wednesday. The move came as other investors notified SAC Capital Advisors Monday that they would redeem an estimated $3.5 billion from the firm, according to The Wall Street Journal. Monday marked a second-quarter deadline for investors to withdraw funds and followed a $1.7 billion exodus from the $15 billion hedge fund earlier this year, the newspaper reported. Blackstone, SAC’s largest outside investor, plans to partially redeem its investment in the beleaguered hedge fund, possibly as much as $400 million, according to The Wall Street Journal. Earlier this year, Blackstone pulled $100 million of its $550 million from SAC, the newspaper said. KRS has more than $440 million in a Blackstone hedge fund of funds and an additional $85.8 million tied in other Blackstone funds, according to the agency’s March quarterly investment holdings report. Carlson said the pension system had minimal exposure to SAC because its investment with Blackstone was placed in a separate account from Blackstone’s commingled funds invested in SAC. “As a result, the positions in our account are not necessarily the same as the flagship fund of funds product,” he said in an email. The plan’s maximum exposure to SAC was less than 0.05 percent of the plan’s nearly $15 billion in assets, he said. “Given the increasing discomfort around this position internally at the beginning of the year, staff encouraged Blackstone to consider submitting this small position for full redemption on behalf of our account, which Blackstone did at the earliest possible redemption window,” Carlson said in the email. KRS has been kept abreast of the latest developments during monthly conversations with Blackstone, he said in a telephone interview. KTRS, meanwhile, has only $20.4 million in a Blackstone real estate fund, according to it December investment holding report. Paul Yancey, KTRS chief investment officer, said the teachers’ pension system has no exposure to SAC. A federal probe into insider trading allegations at SAC has intensified in recent months. The Wall Street Journal reports SAC agreed to a $616 million settlement with the U.S. Securities and Exchange Commission on two insider trading cases involving SAC employees. Regulators said it was the largest insider trading settlement ever. The firm neither admitted nor denied wrongdoing in the settlement. The hedge fund’s billionaire founder, Steven A. Cohen, has not been charged with any crimes, but former SAC employees have been charged or implicated in the insider trading probe. On Wednesday, a federal judge set a November trial date for former SAC hedge fund portfolio manager Mathew Martoma, who is accused of earning $9 million in bonuses after persuading a University of Michigan medical professor to leak secret data from an Alzheimer’s disease trial between 2006 and 2008. The government has alleged that Martoma’s inside information enabled other investment professionals at the hedge fund to earn a quarter-billion dollars illegally. The government has called it the biggest insider trading case in history because of the size of the illicit profits. An SAC spokesman has said the company and Cohen are cooperating with the government’s inquiry and “are confident that they have acted appropriately.” Martoma, 38, of Boca Raton, Fla., has pleaded not guilty. He was arrested in November and is free on bail. His lawyer, Richard Strassberg, declined to comment after Wednesday’s hearing.
Posted on: Thu, 06 Jun 2013 18:26:07 +0000
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