Hedge Fund Portfolio Tracking: Galleon Group (Raj Rajaratnam), Q3 2008

by: Market Folly

This is the Third Quarter 2008 edition of our ongoing hedge fund portfolio tracking series. Before reading this update, make sure you check out the preface to the series we're doing on Hedge Fund 13F filings here.

The other funds we've already covered include:

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 fouryears while overseeing $250 million. Raj received both a BSc in Engineering and an MBA in Finance from the University of Pennsylvania.

Taken from its 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 its long equity, note, and options holdings as of September 30, 2008 as filed with the SEC. All holdings are common stock unless otherwise denoted.

Some New Positions (Brand new positions that it initiated in the last quarter):

  • A ton of different batches of S&P 500 index (NYSEARCA:SPY) Puts
  • A few different sets of Nasdaq index (QQQQ) Puts
  • Some sets of Russell 2000 Index (NYSEARCA:IWM) Puts
  • Oil Service Sector (NYSEARCA:OIH) Puts
  • Some S&P 500 (SPY) Calls
  • Nokia (NYSE:NOK) Calls
  • Amag Pharma (NASDAQ:AMAG)
  • Marathon Oil (NYSE:MRO)
  • Pfizer (NYSE:PFE)
  • Baidu (NASDAQ:BIDU)

Some Increased Positions (A few positions it already owned but added shares to):

  • Mastercard (NYSE:MA): Increased position by 4,366%
  • Analog Devices (NYSE:ADI): Increased position by1,961%
  • Advanced Micro Devices (NYSE:AMD): Increased position by 1,716%
  • Halliburton (NYSE:HAL): Increased position by 983%
  • EMC (EMC): Increased position by 692%
  • Select Sector Financials (NYSEARCA:XLF): Increased position by 496%
  • SPDR S&P500 (SPY): Increased position by 311%
  • Applied Materials (NASDAQ:AMAT): Increased position by 281%
  • SPDR Gold Trust (NYSEARCA:GLD): Increased position by 175%
  • Apple (NASDAQ:AAPL): Increased position by 62%
  • Synaptics (NASDAQ:SYNA): Increased position by 55%
  • Microsoft (NASDAQ:MSFT): Increased position by 18%

Some Reduced Positions (Some positions it sold some shares of - note not all sales listed):

  • Google (NASDAQ:GOOG): Reduced position by 89%
  • Intel (NASDAQ:INTC): Reduced position by 40%
  • Hewlett Packard (NYSE:HPQ): Reduced position by 36%
  • First Solar (NASDAQ:FSLR): Reduced position by 34%
  • Nokia (NOK): Reduced position by 34%
  • Electronic Arts (ERTS): Reduced position by 33%
  • Qualcomm (NASDAQ:QCOM): Reduced position by 28%
  • Research in Motion (RIMM): Reduced position by 22%

Removed Positions (Positions it sold out of completely):

  • A ton of different batches of S&P 500 index (SPY) Puts
  • A few different sets of Nasdaq index (QQQQ) Puts
  • Some sets of Russell 2000 index (IWM) Puts
  • Priceline (NASDAQ:PCLN)
  • Inventiv (VTIV)
  • Nokia (NOK) Calls
  • Yahoo (NASDAQ:YHOO) Calls
  • Google (GOOG) Calls
  • Novartis (NVA) Puts
  • Cisco (NASDAQ:CSCO) Puts

Top 20 Holdings (by % of portfolio):

1. SPDR S&P 500 (SPY): 9.1% of portfolio
2. 1st batch of (SPY) Puts: 4.1% of portfolio
3. 2nd batch of (SPY) Puts: 2.1% of portfolio
4. Advanced Micro Devices (AMD): 2% of portfolio
5. 1st batch of (QQQQ) Puts: 1.8% of portfolio
6. 3rd batch of (SPY) Puts: 1.76% of portfolio
7. Apple (AAPL): 1.67% of portfolio
8. 4th batch of (SPY) Puts: 1.65% of portfolio
9. 1st batch of (SPY) Calls: 1.38% of portfolio
10. 2nd batch of (QQQQ) Puts: 1.28% of portfolio
11. 5th batch of (SPY) Puts: 1.09% of portfolio
12. 6th batch of (SPY) Puts: 1.06% of portfolio
13. 1st batch of (IWM) Puts: 0.95% of portfolio
14. 2nd batch of (IWM) Puts: 0.91% of portfolio
15. 3rd batch of (IWM) Puts: 0.87% of portfolio
16. 7th batch of (SPY) Puts: 0.81% of portfolio
17. 8th batch of (SPY) Puts: 0.81% of portfolio
18. EMC (EMC): 0.8% of portfolio
19. Microsoft (MSFT): 0.79% of portfolio
20. Hewlett Packard (HPQ): 0.75% of portfolio

Assets from the collective long U.S. equity, options, and note holdings were $8.3 billion last quarter and were $7.1 billion this quarter. As you can see, Galleon Group holds various sets of puts on the indexes, taking a pretty bearish stance on the markets, having replaced its old batches of options with new ones. We have not detailed the changes to every single position in this update, but we have covered all of the major moves.

Also, keep in mind that these filings only include long equity, notes, and options holdings. They do not reflect its cash, short portions, or holdings in other markets (currency, commodities, debt, foreign markets, private equity, etc.).

Overall, it's been one of the worst years ever for hedge funds, as we noted in our November hedge fund performance number update. Thus, the recent moves they've made in their portfolios become all the more interesting given the way the market has played out.