SAC - The Real Issue

Apologies its been too long but these markets have been tricky and I had to prioritize my investors. Thankfully this paid off and I pleased to have delivered nearly a 20% return for them in these markets. Ok lets talk insider trading and hedge funds. Of course as SAC and Steve Cohen come under scrutiny its worth thinking about exactly what the hedge fund industry has become. I started as a hedge fund manager at a similar time to Steve Cohen. He was one of the most gifted equity traders there was. He could have a positive view on a company and yet on a daily basis be short that company make money  and then go back to being long. But SAC today is a billion dollar hedge fund and Steve's style cannot run that size money. So he had to bring in other managers and traders. as SAC success grew so did their asset base and Steve became a smaller percentage of the capital. He made a conscious decision to build SAC into a large asset management firm and by doing this he made the decision to focus on management fee and not performance fee. I took a different route, always running a small amount of money for a select group of investors but my income is driven my income performance. Is Steve more wealthy than me? In pure money terms yes. We occasionally cross paths in the art world and he has more buying power than myself for sure ( I believe he is in the top 3 art buyers in the world. An unregulated market where insider trading, and cornering a market is legal!). But wealth is not just measured by money. I provide a service where my investors are my friends (this probably has a lot to do with the fact I make them money rather than my personality). I do not employ anyone else and have no operational headaches focussing on investing. Steve has to run his firm, which involves a lot personnel issues and ultimately has led him to getting the negative press he is receiving. Do I think Steve is an insider trader..No. He was always looked after by the street (Wall Street), was one of the first calls on breaking news but this is all legal and he had the knack to take advantage of it.  However this skill is only privy to a few and the vast majority of Steve's employees are no where near as good as him. This then leads them to the temptation to cheat. Unfortunately SAC only crime may well be that they did not have the infrastructure operationally to identify and prevent this. It basically comes down to a simple fact: hedge funds should not be that big. I often think how I would create a large hedge fund and I have come up with one solution. Get together a small group of experienced and talented managers and create a super hedge fund. I thought of calling up Bruce Kovener, Louis Bacon, Paul Tudor Jones and Steve Cohen and suggesting it to them. But I would imagine that ego might be a preventive factor and in truth we all are in control of own lives so why? I would do it as a showcase, to show there is still trading talent in the hedge fund world. However this talent sits with a few. I feel sorry for all those institutional investors: pension funds, insurance companies etc who believe large hedge funds provide them alpha. Let me tell you they don't, they can not, they are far to big not to be Beta. Anyway I guess that is human nature..Alfred Winslow Jones created a great vehicle, for approximately 50 years it delivered excessive returns but now greed has destroyed this product. I hope Steve Cohen does not suffer too much from this, he is someone to respect. He probably needs a good succession plan at SAC but that a discussion for another time....