In one case, it charged, SAC hired a candidate for portfolio manager in 2008 despite his “recognized reputation for insider trading” and over the objections of the firm’s legal department.
Hedge funds like SAC Capital are portfolios of investments that are aggressively managed with the goal of producing higher returns than the stock market as a whole.
Traditionally, the funds catered to institutional investors and wealthy individuals. In recent years, they’ve grown substantially and attracted many pension funds, university endowments and ordinary investors. That means that, at least indirectly, millions of people now invest through hedge funds.
The fund managers use a range of strategies, including some highly risky ones, in pursuit of outsize gains. They invest in nearly anything: commodities, real estate and complex derivatives as well as ordinary stocks.
The funds typically charge a 2 percent fee on assets under management to cover expenses and pay. Depending on the amount of assets the fund manages, that fee can generate tens of millions of dollars, if not more. On top of that, hedge funds typically collect 20 percent of the annual profit the fund delivers.