Steve Conn's - From a Poker Master to the King of Trade

The debut.

Steve Cohen, in English, is known as Steve Cohen. Cohen means 'king' in Jewish.

On June 11, 1956, in Great Neck, Long Island, the king of hedge funds was born here.

Great Neck in Long Island sounds amusing, but in reality, it has the top school district in the USA. It's not surprising that such an environment nurtured a trading genius like Cohen.

Born in a middle-class family, Cohen was exposed to investments from a young age. At just over ten years old, he ran to a local brokerage firm to check stock quotes. However, compared to stocks, Cohen preferred playing Texas Hold'em poker during high school because he always won money, earning a few thousand dollars in one night was just a small case.

After becoming famous, Cohen gave high praise to that experience: 'It was poker that taught me how to assess and take risks.'

A small test of skills.

In 1974, Cohen graduated from high school and was accepted into the famous Wharton School. During his time there, Cohen did not remain idle; with his $1,000 tuition, he opened a brokerage account, officially starting his trading career.

Obsessed with stocks, Cohen joined Wall Street immediately after graduating from college as a junior trader, specializing in options arbitrage. A genius is indeed a genius; on his first day at work, Cohen made $8,000, which was a significant amount in 1978.

This is not all; as his experience grew, Cohen's trading skills continuously improved. Soon, his daily profits reached $0.1 million. What does this concept mean? Converting it, just from trading, Cohen could earn up to $0.2 billion Hong Kong dollars in a year.

Such an outstanding talent naturally would not go solo. In 1984, Cohen reached an agreement with the company to establish a division and form his own trading team, which lasted for 8 years. The boss of that company still remembers: "He quickly learned how to execute group trades in a big firm and did better than anyone else."

A dragon soaring in the sky.

As the saying goes: "The golden scale is not just a creature in the pond; once it encounters wind and clouds, it transforms into a dragon."

In 1992, with the right opportunities, Cohen established his own hedge fund, S.A.C. Capital, starting with $25 million. At the beginning of his venture, Cohen brought many talented individuals from his former employer, all of whom were excellent performers, and naturally, their performance was outstanding.

In its first year, S.A.C. Capital achieved a 17% return on investments. In the second year, this number skyrocketed to 51%, far surpassing other competitors. In fact, after S.A.C. Capital was founded, its average annual return reached an astonishing 30% for nearly 20 years. This was achieved even after deducting various high fees (3% management fee and 50% performance fee).

Therefore, even though S.A.C. Capital had high fees, investors were still flocking to it. At its peak, its assets under management exceeded $15 billion. Of course, maintaining such excellent results would not be sufficient with just Cohen alone; a good trading team is also very important.

In this regard, Conn's has a very simple but extremely effective trick: "Willing to spend money." There was once a legendary Chinese trader named Jiang Ping, who won a jaw-dropping bonus of 0.1 billion USD at S.A.C. Capital based on his performance.

This is Conn. As long as you make him money, he will immediately cash out for you.

The dragon is regretful.

In the I Ching, Qian: "Upper nine, the dragon is regretful." It means if the dragon flies too high, it will inevitably face disaster. Those in high positions must guard against arrogance, otherwise they will fail and regret.

It is clear that Conn has not read the I Ching and does not understand the meaning of "the dragon is regretful." In 2013, Conn, who was once hailed as the "White Shark" by clients, ran aground.

The specific situation is as follows:

In November 2012, the US Securities and Exchange Commission defined that a trader at S.A.C. Capital - Mathew Martoma was involved in insider trading.

In July 2013, the US Securities and Exchange Commission sued S.A.C. Capital for inadequate supervision in civil court.

In November 2013, S.A.C. Capital agreed to plead guilty and pay a fine of 1.8 billion USD. Due to good behavior and proactive payment of the fine, the USA SEC did not pursue charges in criminal court, instead reaching a settlement.

However, despite the settlement, the business had to take a pause. In 2013, S.A.C. Capital returned all the money from external investors and from then on only managed its internal funds.

Is the legendary era coming to an end?

Make a comeback.

Although struck hard by regulators, Conn's did not fall into despair.

"If you won't let me raise funds from outside, that's fine, I have my own money."

In 2014, Conn's restructured and founded Point72. Although not able to make money with other people's funds anymore, Conn had his own money, so starting a Fund was still quite easy.

However, after the baptism of litigation, Conn also became much more restrained. Compared to the predatory culture of S.A.C. Capital, Point72 is more steady and calm in terms of ethics, values, and corporate culture, with compliance and risk control having been strictly improved.

In January 2016, after a long period of observation, the USA Securities and Exchange Commission issued a two-year ban as a final measure before settlement. In 2018, when the ban expired, Point72 reopened to the public. Data shows that by January 2022, Point72's assets under management had exceeded 24 billion dollars.

In other words, Cohen, the king of hedge funds, is back.

Next, we will await to see where Cohen's legendary journey will lead.