Galleon Moves Its Portfolios to Nearly All Cash

Date: Thursday, November 5, 2009
Author: DealBook.blogs.nytimes.com

The Galleon Group has converted nearly all of its hedge funds into cash, as the firm seeks return money to its investors in light of its founder’s arrest on insider trading charges, according to a letter to investors obtained by DealBook.

Shortly after its founder and chief, Raj Rajaratnam, was arrested last month, Galleon has sought to wind itself down. The firm’s employees recently received severance notices, effective in six months, people briefed on the matter told DealBook.

In the letter, Galleon says that its six funds have been converted to between 87 percent cash and 99 percent cash. It has sought to liquidate its positions — mostly easy-to-sell securities like large-cap stocks — to distribute money back to investors soon after Nov. 30.

Galleon also disclosed its funds’ net performance for the month and the year to date. Only one, the statistical arbitrage fund, reported a down month for October with a -.33 percent return; the best performer was the Buccaneer’s fund with a 1.14 percent return. Year to date, the funds were all up, from .66 percent for the Asia Macro fund to 33.3 percent for the Asia Long/Short fund.

“We have consistently maintained that our portfolios are liquid, and we were pleased to be able to convert the bulk of our investments to cash in an efficient manner without compromising performance,” the firm said in its letter.

Galleon also reiterated that it has been contacted by “several investment firms” have expressed interest in its investment team. The firm said that it is exploring potential alternatives, including a possible sale.