It turns out that being the target of the government’s insider-trading crackdown has perks.
Hedge-fund behemoth SAC Capital Advisors boosted bonuses yesterday in a bid to keep jittery employees from jumping ship as the embattled firm fights insider-trading charges.
SAC promised to boost 2014 performance bonuses by 3.5 percent for portfolio managers of long-short funds, macro funds and so-called quant funds, according to a person with knowledge of the situation.
It also guaranteed long-short stock analysts that they will receive a minimum of $300,000 in pay next year, the person said.
The sweetener comes on top of promises made earlier this year to raise 2013 bonuses for long-short equity traders and macro managers by 3 percent.
SAC, founded by famed trader Steve Cohen, saw outside investors run for the exits after prosecutors hit the $14 billion firm with criminal charges.
In July, Manhattan US Attorney Preet Bharara accused the firm of running a decades-long insider trading scheme “on a scale without precedent.”
In addition to the criminal case against SAC, Cohen also faces civil charges brought by the Securities and Exchange Commission for his alleged failure to supervise two former employees who face separate trials for insider trading in November.
After investors have had a chance to redeem their money, SAC’s assets are expected to drop to roughly $9 billion — mostly Cohen’s and employee money — from $15 billion at the start of this year.
Stamford, Conn.-based SAC has long been known for its generous compensation, which is one reason so few traders have abandoned ship, sources said.
“The percentage that they pay is substantially higher than the general marketplace,” said Bob Olman, founder of executive search firm Alpha Search Advisory Partners. “So it’s tough for them [employees] to find the same economics elsewhere.”
Hedge-fund recruiters say that some SAC traders who have looked for jobs elsewhere have come away discouraged by the potential pay cuts.
Meanwhile, Bharara is clearing the decks ahead of his criminal suit against the firm. Yesterday, Manhattan federal Judge Richard Sullivan agreed with prosecutors’ request to postpone the civil forfeiture suit against SAC to make way for discovery in the criminal case.
The forfeiture case, which Bharara brought at the same time as the criminal case, seeks “any and all” assets of SAC.