The saga surrounding SAC Capital Advisors and its head, Steven Cohen, may produce another example of a hedge fund business transforming itself into a family office structure in which no non-family money is run, some commentators are speculating.

That, at least, is the conclusion drawn by the Financial Times in an article about the Cohen saga. It makes a certain level of sense: other hedge fund luminaries (for very different reasons, it should be stressed), have taken the family office route as a result of regulatory pressures in the US and other factors.

If Cohen is forced to drastically rein in operations, he could pay money to external clients, and use the SAC business solely to manage the Cohen family wealth, the FT said.  

In November last year, Weintraub Capital Management, a $1 billion San Francisco-based long-short equity hedge fund, was reportedly returning money to investors and become a family office overseeing the wealth of founder Jerry Weintraub. In July 2011, Soros Fund Management – the business of hedge fund legend George Soros - stopped managing funds for outside investors and became a family office. To some extent, regulatory changes in the US and elsewhere have been a factor. Industry experts have told Family Wealth Report that in the case of the Soros firm, it would have to have been registered with the Securities and Exchange Commission by March 2012 along with hundreds of other asset managers, including firms outside the US and in the UK. In October 2012, a New York-based multi-strategy hedge fund firm, Brencourt Advisors, returned outside capital to investors and re-invented itself as a family office.

US prosecutors are trying to push SAC Capital out of the professional money management business. Prosecutors are also seeking forfeiture of SAC profits that it claims were gained by insider dealing. Cohen, the sole owner of SAC, has not been accused of criminal wrongdoing and faces no charges.

Yesterday, federal prosecutors announced criminal charges against the hedge fund firm. The authorities argued that the firm and its units permitted a systematic insider trading scheme to unfold from 1999 to 2010, activity that generated hundreds of millions of dollars in profit for the firm. As previously reported, the Securities and Exchange Commission wants to ban Cohen from the industry as part of a civil complaint that he failed to properly supervise employees now accused of illegal trading.

Latest reports say that SAC has told clients, employees and counterparties that it will stay open for business.

In any event, even if Cohen is able to continue operating his business in some form, he might decide that the pressure is not worth the while in the long term, and convert to a family office business.