So begins the most glorious lede to a story ever to grace the (web) pages of Bloomberg. But let us backtrack for a second. As it is an incredibly secretive organization, even by the industry’s standards, many of you probably have unanswered questions about SAC, and how it became of of the most successful hedge funds ever.
Those making educated guesses have probably assumed that the culture involves a lot of drum circles, trust-falls and talk about feelings. Also a logical assumption to make would be that traders are not judged on performance– that would be too stressful and mean.
According to Bloomberg, not so much! Incredibly, employees at the $12 billion firm are judged on the work they do and– just wait, you’re not going to believe this– if they lose money, are asked to leave. (I know, this is a lot to process but we’re going to get through it together.)
Its founder, 54-year-old Steven A. Cohen, hires traders and gives them some SAC money to manage on their own, according to former employees. If they do well, they get more money to manage and a green light to hire analysts to help research stocks. If they do poorly, they’re out. The result is a firm composed of fiercely competitive pods, with many of the best managers eventually leaving to start their own firms, the former employees say.
And it doesn’t stop there. Founder Steve Cohen– and this is just absolutely insane– expects these guys and girls to know shit about the stocks they’re buying and selling, which is wild.
Cohen, sitting in the middle of a trading floor in Stamford, Connecticut, drives his groups hard, former employees said. One, who declined to be named, quit after working every Sunday for a whole summer. Cohen talked to his portfolio managers and analysts every Sunday, quizzing them on their stock holdings, to prepare for the coming week.
Based on these alarming revelations, Bloomberg posits, it’s pretty easy to see how things can get out of hand. With these absurd ground rules* in place– 1. work hard 2. success is rewarded and failure is not — widespread corruption is inevitable. Anyone wondering about the events of the week need only look to The Fleece.
SAC `Eat-What-You-Kill’ Culture Bred Funds Under Scrutiny [Bloomberg]
*Which some– crazy people and hobos, mostly– might say govern every single job in the corporate world
Asked to leave? I’m shocked, shocked I tell ya!!!
“You’re only as good as your last envelope.” – Stevie.
This is exactly the corporate culture we “hope to change”
Anybody who wants to work there has to know what they want. God bless America!
Hedge funds are Wall Street firms now?
Are the PMs allowed to have their ‘insiders’ attend the Sunday meeting, or is that frowned upon?
Umm Bess, not to go all ATL reader on Elie here, but it seems you may have a typo.
“Incredibly, employees at the $12 billion firm are judged on the work they do and– just wait, you’re not going to believe this– if they fail lose money, are asked to leave. (I know, this is a lot to process but we’re going to get through it together.)”
Perhaps, an “and” might help in there.
looks like it’s already fixed, doesn’t it?
It’s clear to me that they are totally lacking in bizarre zoological analogies and therefore can not be suceeding by legitimate means.
-Ray D
New hires may also be in the studio audience of CRISTINA.
I was awoken by a call from Stevie one Sunday morning in Amagansett after a 5 am night at the talkhouse. I told him to take his fat as* down to Brents and get me an egg sandwich and he could come over to discuss my holdings. I never heard from him again. Now I work for a nice man named lloyd
Why such a hard-on for this article? Isn’t it really about the complete lack of trader oversight and the culture to “make money at all costs” rather than “hard work” and “rewarding success vs failure”? So DB’s now endorsing the mantra “do what you need to in order to make money regardless of whether or not it is ethical or illegal, just dont tell me anything about what you are doing and sign a contract that says you are on your own…”. Sad times, but not surprising to hear from the DB generation….although unexpected from DB. You’ve dropped several notches in my book. Although you probably dont give a crap or should.
Old guy, if you re-read the article you can see it is laden heavy with what the kids these days refer to as sarcasm. Dont get your ooops I crapped my pants all out of sorts
LBOB?
Just a few points, if I might…
1) I generally really hate having to Explain The Joke but for you I’ll make an exception. The post is meant to point out the hilarious thesis of the article.
The article essentially faults the competitiveness of SAC for the ethical lapses of the employees, when the fault lies first w/ the employees who had the ethical lapses and second perhaps due to some lack of control/oversight system at SAC (THIS, BTW, ALL PRESUPPOSES THERE HAVE IN FACT BEEN ETHICAL LAPSES, WHICH SO FAR IS FAR FROM PROVEN). But the fault does not lie in the competitiveness of the culture. Because every corporation is like that; and most every company in the world that pays bonuses hinges the bonuses to some degree on performance and therefore is to some degree a “eat what you kill” place.
2) The post– not even once!– says or suggests Dealbreaker Okays Insider Trading
3) Not really sure how the above is “unexpected from DB.” It’s actually pretty standard DB.
4 The dropping of notches hurts me.
5) The DB dick in residence is we’re barely at a 9, but thanks for noticing.
Because, OG, in its classic Matt Winkler long-on-headline-impact-short-on-substance style, the article is bullshit, and BL and DB loyals are just calling it out. Get it?
Just a few counter points to your points:
1. The article sucks – but it also sucks in its “hilarity”. Its mediocre Bloomberg insider trading SAC spam. But, I dont see how you cant find fault with a firm for creating the culture they allegedly do – “compete and win at all costs, and if you lose you’re fired and if you cheat and get caught then you’re on your own – so if you cheat, dont tell me and dont get caught” – assuming thats what this firm did….wink, wink…. And no, not every corporation is like that – actually, no good corporation is like that or even close – spend a few decades in the real world rather than a few years behind a computer screen and you’ll figure it out. Sure, the fault lies with the employees, but if the employer creates an atmosphere that attracts, retains and rewards the type of employee that would be inclined to an ethical lapse for financial gain then they are just as culpable. Have you read the SAC code of conduct? Do they have one? Based on what appears to be a limited scrutiny of trader activities, it doesnt seem they care or want to “scrutinize”. Again, I dont know, but if that’s the case then SAC is absolutely at fault.
2) The comment– not even once!– says or suggests Dealbreaker Okays Insider Trading. It simply says you dont know what you’re out of your league on this topic and fail see the problem with a no holds barred culture of competition established by a company.
3) “Unexpected” in that it wasn’t witty, thoughtful, thought provoking nor smart. It was actually a conclusion I would have expected to hear from Maria Bartiromo 15 years ago – and probably did.
4 We’re a country of second chances.
5) Hopefully we can get that up to 10.
Hey! I trade LBOB. It’s a form of gasoline, you know.
I think Bess did a good job of explaining.
-The Joke Briefer
the post is taking BBERG to takes for lazy, sensationalist journalism. they are taking the point that SAC has a competitive atmosphere and attempting to say…”and this is why they’re being investigated.” nevermind the fact that BBERG has no idea if SAC did anything wrong at all. it’s tabloid crap and they should be above it.
Too long, didn’t read, wish there was a dislike button. For future reference, there exist only two rules:
1) Don’t trade on material inside information procured from expert networks run by guys named “Chu,” or otherwise abide by Chinese ethical standards whilst trading U.S. equities
2) Don’t talk back to BL
- Guy who has already examined his motives regarding point number 1, and is comfortable with them.
You lost me at twas
absolutely we need a dislike button. Although I dislike the fact that I posted this.
A highly competitive culture is not the same thing as a “win at all costs” culture.
Suggestion:
1. Go pick up a six-pack of Four Loko (not Grape).
2. It will all make sense soon.
When you have 800 employees there are bound to be some bad apples.
Best thing to do imo, is to go all the way and ask every portfolio manager to start their own LLC and pay them a percentage.
I’m sure many people would like it if hedge funds worked the same way as the Bank of England Gilt trading operation (yes there really is one).
- The guys’ (very modest) pay is totally unlinked to performance.
- They trade for fun, more or less at random, in a listless manner.
- They work their contracted hours only (not paid enough to do any more).
- If they lose money, they don’t lose any sleep over it: they won’t be fired.