Clients Should Love Steve Cohen

The thing about Steve Cohen is that, when he ran a hedge fund, it was a really really good hedge fund. He bought stocks that went up, a lot, over and over again. Clients tend to like hedge-fund managers who do that, and they showed their appreciation by, for instance, paying Cohen way-higher-than-industry-standard fees for his services.

Now, it eventually turned out that some part of Cohen’s success—it’s hard to quantify the percentage but it was certainly higher than zero—was due to there being a lot of insider trading by employees at his hedge fund. This, let’s assume, was bad, and Cohen got in trouble for it and had to shut down his hedge fund for a while. But it is important to note that it wasn’t bad for his investors. They didn’t go to jail because some of Cohen’s employees insider traded to make them more money. They even got to keep the money: Cohen’s firm, SAC Capital Advisors, had to pay big fines for all the insider trading, but the fines were paid by the management firm (that is, by Cohen), not by the funds.