If there’s anyone who has a right to be disappointed by Steve Cohen’s returns in 2016, it’s Steve Cohen himself.
Cohen’s firm Point72 Asset Management returned just 1% last year, according to Bloomberg, underperforming both the S&P 500, up 9.5% in 2016, as well as hedge funds in general, which averaged returns of about 5.6% for the year. It was Cohen’s worst year on record other than 2008, when he lost nearly 28%—the only year the billionaire trader has lost money, though he did outperform the broader market.
One thing Cohen currently has going for him is that he doesn’t have to answer to anyone else to explain his subpar performance: Cohen is currently the only investor in Point72, having been barred from managing outside capital until the beginning of 2018 after his former hedge fund SAC Capital pleaded guilty to insider trading in 2013.
Still, in an exclusive interview with Fortune in the fall, Cohen reiterated his desire to not only beat the market, but to be the best among money managers—despite the fact that he doesn’t currently compete for business in that industry. “There may be firms out there that are happy being middle-of-the-pack and having modest returns, and maybe don’t work as hard as other people and are perfectly acceptable. That’s not me,” he said. “If I’m going to be mediocre—if I’m going to be mediocre, I’m going to question whether I should stay in this business.”
Read more: Inside Billionaire Steve Cohen’s Comeback
Indeed, if Cohen wants to begin managing outside money again starting next year — and the consensus in the industry is that he does — investors will want to look closely at how Cohen performed managing his own money these last few years, during which he has implemented strict new compliance procedures and been under the additional close watch of a government-mandated monitor stationed in his own offices. After all, it’s Cohen’s legacy of best-in-class returns that will lure investors back despite the stigma of the insider trading scandal, provided he can still deliver them.
That’s going to be harder, though, if the market continues to behave the way Cohen expects. “The reality is growth is slow, valuations are high—that’s sort of a mix where it’s going to be hard to see great returns going forward,” he told Fortune during the interview. “If there’s a crash or significant correction, then you have an opportunity again because valuations are more reasonable. But right now, at this point, given the way the world looks, I would say returns are going to be pretty meager for the next couple years.”
For more about Steve Cohen’s comeback, watch this Fortune video:
And Cohen is clearly feeling the pressure. In October, he announced a new bonus structure for his traders, upping the potential payout to 25% of their profits (from 20% previously) but only if they outperform certain benchmarks chosen by the firm. Meanwhile, traders who underperform will receive a lower proportion than they used to.
The additional incentive is designed to attract new talent to Point72, which has recently stepped up its recruiting efforts as Cohen himself focuses more on training and mentoring and less on trading stocks himself. After long managing the “big book” — the largest portfolio at his firm — Cohen has lately pared back his personal allocation. His trades still account for as much as 5% of Point72’s profits, but that’s down from 15% some 10 years ago.
Early last year, Cohen blamed a specific phenomenon for a patch of poor performance: Hedge fund crowding —or too many other hedge fund managers piling into the stocks he owned. When those other funds sold out en masse, Cohen said his “worst fears were realized” as he became “collateral damage,” losing 8% in just four days in February 2016.
Cohen managed to recover during the remainder of the year, but only just enough to stay in positive territory.
