SAC Shuts Sigma Debt Unit, Cuts Fixed-Income Trades (Update1)

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SAC Shuts Sigma Debt Unit, Cuts Fixed-Income Trades (Update1)

By Caroline Salas and Katherine Burton

June 27 (Bloomberg) -- SAC Capital Advisors LLC, the hedge- fund firm run by billionaire Steven Cohen, is shutting the debt business of its Sigma Capital Management LLC unit as part of broader bond-trading cutbacks, according to two people with knowledge of the decision.

The firm, which oversees $16 billion, will close the business on June 30, eliminating about eight employees, said the people, who asked not to be identified because the move hasn't been made public. Mark Davies, hired from Bear Stearns Cos. in 2007 to expand SAC Capital's fixed-income investing, is leaving the company.

SAC Capital is shifting the focus of its debt trading, said one of the people, who declined to be more specific. Some of the money SAC Capital had in fixed-income assets will be redeployed to equities, the person said.

The global credit rout spurred by the collapse of the subprime-mortgage market has led firms from Sailfish Capital Partners LLC to Peloton Partners LLP to liquidate funds or shut down this year. Fixed-income hedge funds are among the worst- performing groups, according to data compiled by Hedge Fund Research Inc. in Chicago. Fixed-income convertible arbitrage funds lost 4.5 percent through May.

Cohen, 52, started SAC Capital in 1992 and was originally known as a rapid-fire stock trader. As assets under management have grown, the firm has held positions for longer periods and has built bond, currency and commodity groups.

Jonathan Gasthalter, a spokesman for the Stamford, Connecticut-based firm, declined to comment.

Risk Out

Hedge funds have lost 0.2 percent this year through May, according to Hedge Fund Research. Riskier assets have underperformed as investors fled to safer investments. U.S. Treasuries have returned about 1.9 percent this year compared with a 0.86 percent loss for investment-grade corporate bonds, according to index data compiled by Merrill Lynch & Co.

Hedge funds are private, largely unregulated pools of capital whose managers can buy or sell any assets, bet on falling as well as rising asset prices and participate substantially in profits from money invested.

To contact the reporters on this story: Caroline Salas in New York at csalas1@bloomberg.net; Katherine Burton in New York at kburton@bloomberg.net
Last Updated: June 27, 2008 15:57 EDT