As Investors Bail Out, SAC Shows a Brave Face SAC Capital Advisors, the besieged hedge fund owned by the billionaire stock picker Steven A. Cohen, has told its employees that it will survive a wave of investor withdrawals during the government's intensifying investigation into insider trading at the firm. Investors in SAC have asked to pull a significant amount of money from the fund by a quarterly deadline that expired on Monday, according to an internal e-mail sent by SAC's president, Thomas J. Conheeney. The amount was not disclosed, but it was said to be more than the $1.7 billion taken out earlier in the year, according to a person briefed on the matter. That would leave SAC with only a fraction of the $6 billion in outside capital with which it began 2013. Despite its rapidly shrinking capital base and the government's continuing inquiry, SAC is putting up a confident front. The e-mail reiterated that the fund was stable and that there were no plans to significantly reduce its staff of roughly 1,000. The fund can maintain a secure financial position because Mr. Cohen's fortune accounts for roughly $8 billion of SAC's $15 billion in assets. Yet the exodus of investors is a humbling blow to Mr. Cohen and his firm. Until recently, elite investors had clamored to get into the top-performing hedge fund, despite fees that are among the highest in the industry. Now, the investor departures underscore the reputational damage caused by the spate of criminal cases involving former SAC employees - as well as the authorities" push to build a criminal case against the fund, and possibly Mr. Cohen. A spokesman for SAC, Jonathan Gasthalter, declined to comment. The e-mail, which Mr. Conheeney sent Tuesday, was reported earlier by Bloomberg News. Investors started heading for the exits in November, when federal authorities arrested Mathew Martoma, a former SAC portfolio manager, in connection with what they described as the most lucrative insider trading scheme ever uncovered. It was the first time that the government had brought charges stemming from trades in which Mr. Cohen was involved. In addition to Mr. Martoma, who has pleaded not guilty, at least eight other former SAC employees have been tied to insider trading while at the fund. Four have pleaded guilty to criminal charges. Mr. Cohen has not been charged with any wrongdoing and has said that he at all times behaved appropriately. On Wednesday, a federal judge set a Nov. 4 start date for Mr. Martoma's criminal trial. Until last month, SAC had fully cooperated with the government's investigation, and its investors had mostly remained loyal. But several weeks ago, prosecutors opened a new front in the case, issuing grand jury subpoenas and new requests for information to Mr. Cohen, the firm's founder, and its senior executives. Mr. Cohen is expected to invoke his constitutional right against self-incrimination. The government's latest move infuriated SAC's top officials and lawyers. They had thought that most of their legal problems were in the rearview mirror after agreeing earlier this year to pay the firm's primary regulator, the Securities and Exchange Commission, a record $616 million in penalties to resolve two civil insider trading lawsuits. But not only has the Justice Department continued to pursue its criminal investigation, the S.E.C. is also weighing a civil action against Mr. Cohen for failure to supervise his employees, according to people briefed on the case. After the prosecutors" latest requests, SAC told investors that it would no longer fully cooperate with the authorities or update investors on the case. That decision led to an acceleration of withdrawal requests, said people with direct knowledge of the fund. An ability to monitor and conduct due diligence is paramount in hedge fund investing, and the uncertainty created by the continued investigation made investors uncomfortable, these people said. Investors that have pulled money from SAC include the Blackstone Group, the world's largest hedge fund investor; Ironwood Capital Management in San Francisco; and Magnitude Capital in New York. Notwithstanding the confident tone of Tuesday's e-mail, many expect that SAC will have to cut back. Unlike many hedge funds controlled by one or two portfolio managers making investment decisions, SAC has about 140 small teams to which Mr. Cohen allocates money. The teams are paid as much as 25 percent of the profits that they make. Paying for this decentralized model are the high annual fees that SAC charges outside investors - a 3 percent annual management fee and 50 percent of the profits. Without the rich fees earned from managing other people's money, Mr. Cohen would have to pay these teams himself. Mr. Cohen has remained committed to managing money for clients. He has made several appearances this year at hedge fund conferences, meeting with prospective investors in the hopes of raising money. In January, he showed up at a Morgan Stanley event at the Breakers resort in Palm Beach, Fla. Last month, he attended a Goldman Sachs-sponsored meeting held at Yankee Stadium. His top marketing officers have also reached out to investors in the hopes of persuading them to keep money with the fund. The mass withdrawals are not expected to have an immediate effect on the broader stock market, according to brokerage firm executives. SAC will return the money in three equal installments through the end of the year. Its biggest stock holdings are large companies that can be reduced gradually with little negative effect on their prices, market participants say. Among the fund's biggest positions, for example, are Amazon.com, Starbucks and Boeing. Investors are fleeing SAC despite its stupendous track record. Since 1992, the firm has returned an average of nearly 30 percent a year net of fees, far outpacing the broader stock market. So far this year, however, the fund has had tepid results, returning about 7 percent compared with the market's roughly 14 percent gain. As the inquiry continues, prosecutors are weighing a number of possibilities, including bringing charges against SAC related to the Martoma case based on a theory of corporate criminal liability, according to people briefed on the case. Because the trades at the center of the Martoma indictment occurred in July 2008, the government is running up against a five-year deadline to bring charges. During Wednesday's court hearing, Mr. Martoma's lawyer said that prosecutors had indicated that they would file a superseding indictment in the case, which adds either details, charges or defendants. The government rarely brings indictments against companies, out of concern for job losses, but can impute criminal liability to a company based on the benefit it received from its employees" alleged criminal acts. Justice Department guidelines call for prosecutors to consider a number of factors when deciding to charge a corporate target, including the pervasiveness of wrongdoing and the company's level of cooperation in the investigation. SAC recently announced a broad set of changes to bolster the fund's compliance practices, including clawing back the pay of employees who violate the securities laws. "We have endured speculation that somehow this conduct is acceptable to the firm, its senior management and to me," Mr. Cohen wrote in a letter to investors. It is not, nor has it ever been.