Newspaper article The Evening Standard (London, England)

Shades of Grey: How Hedge Fund King Cohen Edged His Way to $13Bn Fortune

Newspaper article The Evening Standard (London, England)

Shades of Grey: How Hedge Fund King Cohen Edged His Way to $13Bn Fortune

Article excerpt

Byline: Simon English

THERE are three kinds of "edge" that traders seek to put them ahead of the crowd White Edge, Grey Edge, Black Edge.

White Edge is the dull stuff. If you read every publicly available piece of information about a company, every stock-market announcement, every analyst report, every interview with the chief executive, you might know a bit more than the market does about this business. Whether that would help you to trade the stock more cleverly is doubtful.

Grey Edge is where most of the City lives. It is a twilight zone that leaves bankers and the rest knowing more than an investor in the Outer Hebrides could. It's a world of off-the-record briefings, gossipy glasses of wine with the corporate affairs director, the odd nod from a regulator that we are roughly on the right lines.

This is stuff aimed at making City folk better informed less stupid or more favourably inclined towards a specific company. It's a matter of judgment for all involved whether this or that nudge is strictly in breach of the rules on stock-market disclosure. How much of the Grey Edge is already in the market is hard to say for sure.

Black Edge is the dirty stuff the stuff you aren't supposed to know, where the serious money gets made and you end up in jail if you get caught trading on it. It is also the name of a brilliant book about Steve Cohen, the hedge-fund king who turned $7000 into a personal fortune of $13 billion, acquiring the usual trophies along the way wives, houses, Damien Hirst's shark in formaldehyde.

Cohen liked Edge of all sorts, says the book, which serves many purposes, not least to remind you why you aren't writing one. "Edge was the water, and they were swimming in it. And Cohen prided himself on hiring the most determined swimmers," writes Sheelah Kolhatkar.

"Cohen wanted guaranteed moneymaking ideas; the system was designed so that Cohen did not need to know what his traders had to do to get them."

Wall Street insiders thought his fund, SAC Capital, was dodgy for years. There seemed no other way to explain his returns, which consistently beat the market in ways that were statistically improbable. …

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