UPDATE: Galleon Group Winding Down All Hedge Funds
22 October 2009 - 1:13AM
Dow Jones News
Galleon Group is winding down all its hedge funds, company
founder Raj Rajaratnam told employees and investors in a letter
Wednesday.
Rajaratnam was one of six people arrested and charged last
Friday in a massive insider-trading case. The charges had already
caused many Galleon investors to try to withdraw their money. The
deadline for redemption requests in most of Galleon's funds is Nov.
15.
"I have decided that it is now in the best interest of our
investors and employees to conduct an orderly wind down of
Galleon's funds while we explore various alternatives for our
business," Rajaratnam wrote.
According to a person familiar with Galleon, one of those
alternatives is selling Galleon to another firm. The person said
that some parties have expressed interest in buying Galleon.
The person added that Galleon's redemption process will remain
unchanged. Investors won't get their money back until Jan. 1, 2010,
unless the government intervenes.
"They don't know exactly when this process will conclude," the
person said. "But based on what they know right now, it will not be
inconsistent with their standard redemption policies."
In the letter, a copy of which was reviewed by Dow Jones
Newswires, Rajaratnam said he is innocent of all charges. He also
touted Galleon's research process and said the firm wants to keep
together "the best long/short equity team in the business."
Since Rajaratnam's arrest, Galleon managers have sold some stock
to take cash where they could. Many of Galleon's holdings are
stocks of large companies like Ebay Inc. (EBAY) and Apple Inc.
(AAPL), which usually don't move much when one small shareholder
sells.
But Galleon has somewhat significant stakes in some other U.S.
stocks, like drug company OSI Pharmaceuticals Inc. (OSIP) and
management advisor Huron Consulting Group Inc. (HURN). It's
possible that those stocks could drop in the short term if Galleon
sells, but movements in these shares have been consistent with the
overall market in recent days.
Galleon also owns stocks of several companies based in Sri
Lanka, where Rajaratnam was born, and many of those stocks dropped
in the days following his arrest.
-By Joseph Checkler; Dow Jones Newswires; 212-416-2152; joseph.checkler@dowjones.com
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