Steven Cohen is a legendary American investor, hedge fund magnate, philanthropist, and owner of the Major League Baseball team known as the New York Mets. Over time, he has established himself as one of Wall Street’s finest traders.
He is the founder of Point72 Asset Management, a family office based in Stamford, Connecticut. As of 2018, his company managed over $24 billion.
Steven Cohen has a reputation for being an adventurous hedge fund manager. Showtime’s hit show “Billions” character Bobby Axelrod is based loosely on him.
If you are into trading and seeking information about Steven Cohen, you are in the right place. This article contains all the essential details about his life, career, net worth, and more.
Let’s dig in!
Steven Cohen’s Personal Life
Steven Cohen was born into a Jewish family in Great Neck, New York. His father worked in Manhattan Garment District as a dressmaker, while his mother was a piano teacher. Steven Cohen was the third of eight children.
He enjoyed playing soccer and poker games in high school and made bets with his own money in poker competitions.
Steven later explained that playing poker had taught him how to take risks and sparked his interest in speculative endeavors.
After graduating from John L. Miller, Great Neck North High School, in 1974, he went on to earn a degree in Economics from Wharton School at the University of Pennsylvania in 1978.
While at Wharton, he got into trading after his brother’s best friend helped him open a brokerage account with $1k from his tuition money.
Steven Cohen’s Career
After graduating from Wharton in 1978, Cohen began his career at the specialized banking and broker firm Gruntal & Co. He was employed as a junior trader in the options arbitrage division.
At Gruntal & Co., he made $8,000 profit on his first day of work. Six years later, he was given the go-ahead to handle a $75 million portfolio and six traders, earning the organization an average of $100,000 daily.
Cohen continued managing the team and portfolio until he left to start his own hedge fund company (SAC Capital Advisors in 1992) with $10 million of his own capital and another $10 million from outside funding.
Patricia Cohen, Steven’s ex-wife, filed a lawsuit against Cohen and his brother Donald T. Cohen in December 2009, alleging racketeering and insider trading.
Furthermore, in 2013, the Securities and Exchange Commission charged eight traders at his company with insider trading. Cohen was also charged with failing to prevent insider trading.
All eight were declared guilty, even though two of the convictions were later overturned.
Cohen’s company pleaded guilty and reached a settlement totaling nearly $616 million with the SEC, while it also had to pay $1.8 billion in penalties. The company was prohibited from managing outside investors’ funds.
In response to the settlement, Cohen closed SAC Capital Advisors and launched Point72 Ventures, “an early-stage venture capital fund,” in 2014.
As of 2020, Point72 has around 1,500 employees and has its main office in Stamford, Connecticut.
Steven Cohen’s Net Worth
Cohen, referred to as “the hedge fund king” in a 2006 piece in The Wall Street Journal, has an estimated net worth of $17.5 billion as of December 2022. Forbes Magazine ranks him the 38th richest person in the United States and 96th globally.
In 2005, Cohen’s compensation was reported to be $1 billion, significantly higher than his 2001 remuneration of $428 million. In February 2015, Forbes ranked Cohen as the top-earning hedge fund manager for 2014.
Steven Cohen’s Trading Strategy
In the early stages of SAC, Cohen’s strategy was to make money by trading 20 million shares daily while holding the stocks for a few days and sometimes only for a few hours. Cohen never held a stock for longer periods and made his money through rapid-fire, high-frequency trading.
However, later on, SAC diversified its approach, venturing into long/short positions, fixed income, and longer-term quant trading methods.
Between 1992 and 2013, SAC produced earnings of 25% on average.
Cohen’s Connecticut-based Point72 Asset Management firm had its best year in 2020, posting a 16% gain since it began accepting outside capital in 2018.
With that said, here are some of Cohen’s leading trading strategies:
Be Passionate About Trading
Steven Cohen once remarked that he has been passionate about stocks since he was a child. He enjoyed it and didn’t just invest in stocks for the profits.
He asserts that it’s crucial to maintain enthusiasm for investing in stocks. Passion can aid in good decision-making when it comes to becoming successful in the stock market.
Keep Your Composure
Steven believes psychology significantly impacts investing as the market constantly changes due to investors’ emotions and reactions to the current environment.
For example, one of his unique approaches was hiring a psychiatrist to coach his traders to help lessen the stress of trading the market.
He notes that it’s hard to stay calm when there is widespread fear. In such situations, anyone can make a poor decision and suffer a considerable financial loss.
Steven believes that, despite the inability to influence the stock market’s activities, one could influence their response to them.
Steven Cohen once noted that it is better to be an expert on one subject than to know little about everything. If you plan to invest, avoid digging at everything you find.
Research the market and the industries, pick the one you are fully knowledgeable about, and then decide if you want to make this the center of your focus.
Develop Aptitude For Research Skills
Steven Cohen advises investors to choose their investments wisely.
It’s crucial to avoid copying other traders’ methods. Everyone should conduct independent research and develop their own trading strategy.
Takeaway: Be Passionate About Trading to Succeed
According to some, Steven Cohen is the exact opposite of Warren Buffet due to his rapid-fire, high-frequency trading style, and that is what makes the hedge fund billionaire unique.
Cohen has often been criticized for his methods. Nevertheless, their efficiency is difficult to overlook.
According to Wikipedia, he and his company have averaged 30% net gains over a twenty-year period.
In 2003, his company turnover was so high that it accounted for 3% of the turnover on the NYSE (New York Stock Exchange).
Here is a recap of some of his strategies:
- When it comes to investing and making money, one thing to learn from Cohen’s approach is that you have to be passionate about it
- Keep calm and have an open mind when investing
- Before investing, do thorough research and learn from past mistakes
- Never lose concentration, and resist letting the market hysteria affect you
That said, it is essential to note that Cohen is a high-risk taker. If you have a low tolerance for risk and haven’t invested in setting up a quantitative trading strategy with the proper risk management fundamentals, then Cohen’s approach might not be for you.
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