Wednesday, October 21, 2009

Galleon to Liquidate After Redemption Requests

Say you have some money tied up in a hedge fund that has posted nice returns for some time. Then one day you pick up the WSJ and the founder is on the front page in handcuffs claiming he's innocent of the insider trading charges brought against him and the insider trading ring he was allegedly running with some of his good buddies from Wharton. Guess what? It turns out that some of the hedge fund guru's charitable giving was funneled to Sri Lankan rebels too. That's right about the point where you put the paper down, make a phone call, yank your money out and put it into some money market fund currently yielding .002%.

No surprise then that Galleon has been swamped by redemption requests and is liquidating assets in order to unwind. A buyer is even circling around the fund, looking to scoop up any remaining assets. Innocent or not, investors don't care to wait around to find out. Why would you? After all, the market's up, the fund has had good returns so far, and serious legal issues are never something that sharpen a money manager's investing acumen. Mr. Rajaratnam will be preoccupied defending himself for some time to come.

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