Why Steve Cohen’s decision to stop trading is such a big deal

Colleagues have described its stripe pattern recognition as the closest thing they’ve ever seen to a human computer. He initially made his fortune (and reputation) as the hard-nosed and ultra-competitive founder of SAC, named after his initials and modeled after his personality.

Yet at Point72—which opened to outside capital in 2018 after a two-year ban after SAC pleaded guilty to insider trading charges and was fined $1.8 billion—Cohen spoke publicly about the way he likes to mentor the next generation of investors as he became a small. part of the total yield of his company. He’s also considered as hands-on as any MLB owner as he tries to get his boyhood team, the New York Mets, their first championship in nearly 40 years.

“Point72 continues to be Steve’s main focus and he is as involved as ever. The only change here is that he will spend less time in front of computer screens and more time working with the investment and talent development teams at the firm,” a statement from a spokesperson said.

It’s a people business

The change reflects what is now required of top hedge fund leaders. Two decades ago, investors bought into SAC because of Cohen’s stock-picking prowess. Now LPs are putting money into Point72 because of Cohen’s leadership.

Among the great multi-strategy managers, the fact that Cohen was still managing a book set him apart from his main competitors. Ken Griffin and Izzy Englander were no longer trading at Citadel and Millennium, respectively, and as Business Insider previously reported, Dmitry Balyasny stepped down from managing a portfolio to focus on running his firm and rebuilding the equity unit.

As the battle for industry talent continues, Point72 has been proactive in building its internal portfolio management pipeline with programs such as Academy, which draws directly from undergraduate programs, and LaunchPoint, which identifies talented analysts internally and trains them on how to become PM.

“It is a tremendous value to have Steve as an impact mentor for our investment professionals; he’s been doing this for 40 years and he’s seen a lot. This is what gives him the most satisfaction these days – helping people succeed and seeing him make a difference – and where he feels he can add the most value,” the firm said in a statement.

Will there be another Steve Cohen?

While the industry has changed, Cohen’s decision is still a critical milestone for the entire industry. The one-time space has grown to more than $4 trillion in assets, and the biggest managers boast thousands of employees, hundreds of supporters and institutional infrastructure.

It’s a positive change for the world’s biggest allocators, who have turned to funds like Point72 and their peers because of their consistent, uncorrelated returns.

But as costs, regulatory burdens and technology requirements rise, new releases have struggled to take off. Cohen launched SAC with $20 million in 1992; today’s new funds need exponentially more to justify leaving seats at funds like Point72.

There are signs that the hold of multi-strategy firms on the industry is weakening. LPs are fed up with the high fees that come with these managers, and potential releases from big name Tiger Cubs like Viking Global and Coatue are getting a lot of attention.

But Cohen was called “the king of hedge funds” by The Wall Street Journal for a reason, and not just because his firm generated profits.

He is the inspiration behind “Billions” protagonist Bobby Axelrod and was portrayed by Vincent D’Onofrio in “Dumb Money,” the film loosely based on the GameStop saga. Among his massive $1 art collection, which was once valued at $1 billion, is a 14-foot shark preserved in formaldehyde. He paid celebrity chef Guy Fieri $100,000 to tour Connecticut restaurants with him for a day in a personalized version of Fieri’s long-running Food Network show.

For an industry that has become more convoluted and less personality-driven, Cohen may be the last of his kind — and the overwhelming feeling among those who have worked with him and competed against him is that this announcement was the end of an era.