Raj Rajaratnam's Hedge Fund Galleon Group: 13F Filing Q4 2008 ~ market folly

Monday, April 20, 2009

Raj Rajaratnam's Hedge Fund Galleon Group: 13F Filing Q4 2008

This is the 4th Quarter 2008 edition of our ongoing hedge fund portfolio tracking series. Before reading this update, make sure you check out the Hedge Fund 13F filings preface.

Next up is Galleon Group. Galleon was founded by Raj Rajaratnam in 1997 and currently manages in excess of $7 billion. Raj previously worked for Needham & Company, and when he left was responsible for a compounded rate of return of 37% over 4 years while overseeing $250 million. Raj received a Bsc in Engineering and then an MBA in Finance from the University of Pennsylvania. And, in 2009 we saw that Raj's accomplishments have paid off as he is on Forbes' billionaire list. Galleon Group's Buccaneer fund was up 13.39% as of late February 2009. Additionally, their Diversified fund was up 9.87% through the same time period, as noted in our January & February hedge fund performances (March '09 numbers here).

Taken from their website, the Galleon Group “manages a series of funds that specialize in the technology and healthcare industries. Currently The Galleon Group manages five different long/short equity funds: Technology, Healthcare, New Media (Internet), Communications and Life Sciences. Galleon’s philosophy and approach differs from that of other hedge funds in the fundamental belief that it is possible to deliver superior returns to our investors without employing leverage. Combine strong fundamental investment analysis with superior trading capability Galleon places a strong emphasis on both fundamental investment analysis and trading. This enables us to identify companies with superior long-term growth prospects while maintaining the flexibility to profit from short-term market fluctuations.”

The following were their long equity, note, and options holdings as of December 31st, 2008 as filed with the SEC. We have not detailed the changes to every single position in this update, but we have covered all the major moves. All holdings are common stock unless otherwise denoted.

Some New Positions (Brand new positions that they initiated in the last quarter):
S&P500 (SPY) Calls, SAP AG (SAP) Puts, Intel (INTC) Puts, Bank of America (BAC) Calls, PNC Financial (PNC), Wyeth (WYE), Atmel (ATML), QQQ (QQQQ), Semi Conductor ETF (SMH) Calls, Genentech (DNA), American Eagle Outfitters (AEO), Yahoo (YHOO), Starbucks (SBUX), FTI Consulting (FCN), AK Steel (AKS), Steel Dynamics (STLD), Schering Plough (SGP), America Movil (AMX), CIT Group (CIT), Amphenol (APH), Maxim (MXIM), Fedex (FDX), NRG Energy (NRG), AT&T (T), Lam Research (LRCX), Kellogg (K), Compuware (CPWR), Shaw Group (SGR), Linear Technology (LLTC), & Ascent Media (ASCMA)

Some Increased Positions (A few positions they already owned but added shares to)
United States Oil Fund (USO): Increased by 14,217%
Yingli Green Energy (YGE): Increased by 755%
Ultrashort Real Estate (SRS): Increased by 537%
Sandisk (SNDK): Increased by 400%
Corning (GLW): Increased by 313%
Seagate (STX): Increased by 120%
Semiconductor HOLDRS (SMH): Increased by 95%
Advanced Micro Devices (AMD) Bond: Increased by 68%
Ishares China (FXI): Increased by 58%
Western Digital (WDC): Increased by 44%

Some Reduced Positions (Some positions they sold some shares of - note not all sales listed)
Nokia (NOK): Reduced by 85%
Apple (AAPL): Reduced by 78%
Synaptics (SYNA): Reduced by 77%
Netapp (NTAP): Reduced by 76%
Qualcomm (QCOM): Reduced by 75%
Applied Materials (AMAT): Reduced by 72%
SPDR S&P500 ETF (SPY): Reduced by 52%
Amag Pharma (AMAG): Reduced by 45%
Microsoft (MSFT): Reduced by 43%
Electronic Arts (ERTS): Reduced by 43%
Marathon Oil (MRO): Reduced by 41%
First Solar (FSLR): Reduced by 40%
Mylan (MYL): Reduced by 40%

Removed Positions (Positions they sold out of completely)
Humana (HUM), Xilinx (XLNX), Qualcomm (QCOM) Calls, Oil Services (OIH) Puts, F5 Networks (FFIV), Cigna (CI) Puts, Shire (SHPGY), Walmart (WMT), Citigroup (C) Puts, Halliburton (HAL) Puts, Apple (AAPL) Calls, Marvell (MRVL), Eli Lilly (LLY) Calls, Advanced Micro Devices (AMD) Calls, Cisco Systems (CSCO) Puts, Transocean (RIG), SPDR Gold Trust (GLD), Intel (INTC), Eli Lilly (LLY), Analog Devices (ADI), Baidu (BIDU), People Support (inactive), Mastercard (MA), Select Sector Financials ETF (XLF), & Advanced Micro Devices (AMD)

Top 15 Holdings (by % of portfolio)

  1. SPDR S&P500 ETF (SPY): 20.4% of portfolio
  2. S&P500 (SPY) Calls: 7.6% of portfolio
  3. SAP AG (SAP) Puts: 3.96% of portfolio
  4. Intel (INTC) Puts: 3% of portfolio
  5. Bank of America (BAC) Calls: 2.1% of portfolio
  6. Advanced Micro Devices (AMD): 2.1% of portfolio
  7. United States Oil Fund (USO): 2.1% of portfolio
  8. Microsoft (MSFT): 1.97% of portfolio
  9. PNC Financial (PNC): 1.8% of portfolio
  10. Wyeth (WYE): 1.7% of portfolio
  11. Apple (AAPL): 1.66% of portfolio
  12. Atmel (ATML): 1.66% of portfolio
  13. QQQ (QQQQ): 1.6% of portfolio
  14. Semiconductor HOLDRS (SMH): 1.48% of portfolio
  15. Semi Conductor (SMH) Calls: 1.48% of portfolio

While they hold various puts and calls on numerous securities throughout their portfolio, their large position in SPY has to have paid Galleon off, assumming they held through the recent equity rally. At 20% of the portfolio, it is/was a serious position for them and Galleon's performance numbers so far this year have been quite solid. It will be very interesting to see what they've done with such a large position come the next batch of 13F filings. Like almost all of the other hedge funds we've covered from Q4 '08, we see that Galleon group was decreasing equity exposure as well. Their assets from the collective long US equity, options, and note holdings were $3.7 billion last quarter and were $1.1 billion this quarter, which is quite a significant drop off. It will be interesting to see if they have re-entered the equity markets in size over the 1st quarter of '09 considering the rally we've seen thus far in the markets. While they do have a large percentage of their portfolio in SPY, they had a relatively low portion of their assets under management exposed to equity markets as of this filing. As always, this will all be revealed in the next round of 13F filings coming due soon. This is just one of many funds in our hedge fund portfolio tracking series in which we're tracking 35+ prominent funds. We've already covered:

We cover a new hedge fund each day and you can see the complete list of hedge fund portfolios here.

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