FOIAengine Reveals a Giant Hedge Fund’s Methods and Targets
Point72, the $140 billion hedge fund helmed by billionaire Steven A. Cohen, produces impressive results year after year for its wealthy clients. The returns can seem almost magical. Or, if you’re one of the federal criminal prosecutors who tried and failed to put the phenomenally successful Cohen in jail, illegal.
But a magician never reveals his tricks. Cohen lets the results speak for themselves. These days, he spends more time talking about his beloved New York Mets. The hedge-fund tycoon paid a Major League Baseball record $2.4 billion to buy the ball club in 2020. The hometown newspaper says that, after taking over the lovable losers and spending lavishly to bring in stars like pitching ace Justin Verlander, Cohen pulled off the ultimate celebrity makeover. Often reviled and always inscrutable, but never lovable or a loser, Cohen now “could probably be elected Queens borough president by acclamation.” Way to go, Steve. Suddenly, you’re an avuncular Twitterer.
Still, it’s Cohen’s day job at Point72 that pays the bills. He puts in the work alongside 2,311 employees at the firm’s Stamford, Conn., headquarters and in money centers around the world. Point72 is a juggernaut. Last year, with the S&P 500 index down 19 percent, Point72 was up 10.3 percent. Cohen’s share of the profits was a reported $1.7 billion – an estimate that may be wildly low given that he is the firm’s sole owner. What’s his secret?
Unlike newer quant hedge funds that strictly hew to computer-driven proprietary algorithms, Point72’s strategy is an old-school mash-up. Point72 calls itself “an ideas business,” and Cohen is known to be a devotee of the mosaic theory of stock picking – digging for nuggets of non-public (but not illegal) information in order to get an edge. These days, that includes using the Freedom of Information Act.
In rare interviews, Cohen has characterized his approach as, in essence, a mix of tape watching, gumshoe data gathering, and gut instinct. Cohen parks himself in front of eight monitors in the middle of the main trading floor, keeps the big room chilly to make sure traders stay alert, and encourages them to take risks fearlessly. He put a psychologist on staff to help with the stress. It’s stock trading as an art, not a science.
In the peak boom years of 1999 and 2000, Cohen’s previous hedge fund, SAC Capital, returned, respectively, 68 percent and 73 percent to investors. “Back then,” he told an interviewer, “it was a license to print money.”
His almost-too-good-to-be-true success led to a long-running federal criminal insider-trading investigation involving informants and wiretaps. Cohen was never indicted. He settled civil insider-trading charges with the Securities and Exchange Commission by shutting down SAC Capital, without admitting guilt. In 2018, he reopened and rebranded his fund as Point72. Same game, new name: Point72 is a play on the firm’s Stamford address at 72 Cummings Point Road.
“This is an information business,” Cohen explained when he was just starting out, “and the only way to be successful is to pay attention to what is going on and find situations that make sense. . . . Nothing stays the same in this business. You have to constantly adapt and evolve and learn what the new game is, and then play accordingly.”
At Point72, the new game is FOIA. Among hedge funds making FOIA requests to the federal government, Point72 is the undisputed leader. The firm made 56 FOIA requests to the Food and Drug Administration in the past 16 months, including eight in April 2023 alone.
FOIA requests can be an important early warning of bad publicity or litigation to come. But they may also signal an activist investor’s interest in targeting a company’s stock as a buying or short-selling opportunity. That is why PoliScio Analytics’ competitive-intelligence database FOIAengine tracks FOIA requests in as close to real-time as their availability allows. Of particular interest are requests that may significantly affect stocks and markets once the stories hit.
Point72’s FOIA requests reveal that the hedge fund is compiling dossiers on a raft of pharmaceutical and biotech companies, and is focusing, among other things, on reports of adverse drug reactions or failed inspections at manufacturing facilities. Companies that it made requests about during the first four months of 2023 included Medtronic (NYSE:MDT), Eli Lilly (NYSE:LLY), Ascendis Pharma (NASDAQ:ASND), Krystal Biotech (NASDAQ:KRYS), Alvotech (NASDAQ:ALVO), Revance Therapeutics (NASDAQ:RVNC), Apellis Pharmaceuticals (NASDAQ:APLS), BioMarin Pharmaceuticals (NASDAQ:BMRN), Emergent BioSolutions (NYSE:EBS), and Zoetis (NYSE:ZTS), the only veterinary-drug company on the list.
Some of the companies on Point72’s radar are in the investigational stages with new drugs; most have made strong stock-market runs this year. Notable exceptions are Emergent, which lost 70 percent of its value in the past year, and Ascendis, which in early April took a precipitous dive, falling almost 50 percent from its 2022 high.
Among the many dozens of Point72’s requests, three revealed that its analysts are watching, and following up on, FOIA requests made earlier by others. (In each, the Point72 requester wasn’t named). A breakdown follows.
A Chicago-based hedge fund, Balyasny Asset Management, in February made two FOIA requests to the FDA, asking about “483s” – adverse federal inspection reports – that might have occurred at any of the Krystal Biotech or BioMarin facilities. FDA investigators file a Form 483 when unsafe practices are observed at a facility, indicating that a drug “has been adulterated or is being prepared, packed, or held under conditions whereby it may become adulterated or rendered injurious to health.”
Two months later, Point72 referenced Balyasny’s requests and asked the FDA for the same documents.
Balyasny has 1,651 employees and $19 billion in assets under management. The hedge fund makes investments in health care, online education, software, technology, and fintech. The company’s founder and owner is Kiev-born Dmitry Balyasny, a devotee of libertarian Ayn Rand. He got his start in America as a door-to-door salesman and earned his college tuition (Loyola University, finance major) at a tiny brokerage firm, cold-calling customers. His firm has had its share of recent ups and downs, all documented by the industry bible, Institutional Investor. But recently, Balyasny’s fund has been on a roll. Obviously, the much larger Point72 is paying attention.
A spokesperson for Balyasny said the firm wouldn’t comment on its investments, or on whether it was aware that Point72 was monitoring Balyasny’s FOIA requests.
Another notable Point72 request followed up on a January request by the online publisher FierceBiotech. The media company sought materials relating to a promising new Alzheimer’s drug, called lecanemab, jointly developed by the companies Eisai (OTCMKTS: ESAIY) and Biogen (NASDAQ:BIIB). The FierceBiotech requester, who wasn’t named, asked for “any and all materials related to the FDA’s after-phase-2 meeting with Eisai and/or Biogen regarding the two companies’ Alzheimer’s med, lecanemab. Examples I’m thinking of include agendas, meeting minutes, presentations, [and] any and all recordings.”
A couple of months later, a Point72 requester asked the FDA for all the information that was provided to FierceBiotech. FierceBiotech didn’t respond to our request for comment. Point72’s chief spokesperson, Tiffany Galvin-Cohen, also didn’t reply to questions about Point72’s investing strategy, its use of FOIA, and its tracking of FOIA requests made by others.
Point72’s approach to vacuuming up disparate bits of information in order to gain a trading edge is unique enough that the hedge fund started its own in-house training program, Point72 Academy, to pull in analysts right out of college. More than 150 analysts have joined Point72 through that program, and most are still with the firm. Almost half have an academic background in something other than business. Point72 currently has 207 jobs to fill. You can browse all the open roles here.
“We have PhDs, classically trained musicians, and special forces veterans,” the firm’s website says. “Our strength is in the diversity of perspectives, approaches, and life experiences our people bring to work every day.” One common denominator among them all: “Attention to detail and the ability to distill reams of information into simple ideas.”
Next: A surprising number of state AGs are making FOIA requests. What’s up with that?
John A. Jenkins, co-creator of FOIAengine, is a Washington journalist and publisher whose work has appeared in The New York Times Magazine, GQ, and elsewhere. He is a four-time recipient of the American Bar Association’s Gavel Award Certificate of Merit for his legal reporting and analysis. His most recent book is The Partisan: The Life of William Rehnquist. Jenkins founded Law Street Media in 2013. Prior to that, he was President of CQ Press, the textbook and reference publishing enterprise of Congressional Quarterly. FOIAengine is a product of PoliScio Analytics (PoliScio.com), a new venture specializing in U.S. political and governmental research, co-founded by Jenkins and Washington lawyer Randy Miller. Learn more about FOIAengine here. To review FOIA requests mentioned in this article, subscribe to FOIAengine.