Billionaire investor Steven Cohen said that too many hedge funds placing the same types of bets contributed to sharp losses for his $11 billion Point72 Asset Management earlier this year.
“One of my biggest worries is that there are so many players out there trying to do similar strategies,” Cohen said Monday, speaking at the Milken Institute Global Conference in Los Angeles.
“If one of these highly levered players had a rough run and took down risk, would we be collateral damage?” Cohen said. “In February we drew down 8 percent which for us is a lot. My worst fears were realized.”
Point72 has rebounded to a return of approximately zero for the year, according to a person familiar with the situation.
Cohen also commented on the hedge fund industry’s relatively large size and meager recent returns, saying that both investors and their clients were willing to tolerate lower performance.
“When this business started, guys took pride in the returns that they generated. Guys would make 20, 25, 30 percent,” said Cohen, known for generating similar returns himself. “Now it’s about trying to figure the intersection between assets under management and what investors would be willing to accept.”
The Hedge Fund Intelligence Americas Global Equity index, an industry benchmark, fell 3.2 percent in the first quarter of 2016. The index gained just 0.56 percent in 2015.
Cohen’s presence at the Milken event reflected a newfound openness for an investor who generally avoids media interviews. The public appearance was his third this spring – including events organized by Evercore and the Marine Corp Law Enforcement Foundation – after doing virtually nothing since attending the SkyBridge Alternatives Conference in May 2011.
Cohen famously founded and ran SAC Capital Advisors, one of the most successful hedge fund firms ever.
Stamford, Connecticut-based Point72 is the so-called family office that succeeded SAC, which pleaded guilty to fraud in 2013 and paid $1.8 billion in criminal and civil settlements with U.S. authorities.
It was also forced to return outside capital, although a more recent settlement with regulators would allow Cohen to again manage other people’s money starting in 2018 should he so choose.
Cohen did not address the firm’s regulatory history in his remarks and no questions from the audience or media were allowed.