By Lee Su Shyan, Assistant Money Editor

INVESTORS have started demanding their money back from the Singapore-based Asian operations of the scandal-hit hedge fund Galleon Group, according to reports yesterday.

The group's fund - which is Asia-focused - is liquidating its assets in response to clients who want to withdraw their money, a Reuters story said yesterday.

The move comes as Galleon Group founder Raj Rajaratnam, 52, told employees and investors worldwide on Wednesday that the fund would be winding down in the wake of the biggest insider-trading scandals ever unearthed.
Redemption requests have not surprised those in the industry here.

Mr Peter Douglas, founder of hedge fund consultancy GFIA, said that 'whenever there is bad news, redemption requests will come in rapidly. There is a belief in the industry that when bad stuff happens, it gets worse'.

Mr Douglas said that even though there may be nothing untoward, some investors do not want to leave their cash in a troubled fund.

The managers of Galleon's US$500 million (S$700 million) fund here are looking at a possible buyout of the unit as well as seeking new investors to keep the operations going, according to sources quoted by Reuters.

The top management in Singapore includes former DBS Group Holdings chief operating officer Frank Wong and DBS Bank's former co-head of capital markets David Lau. Mr Wong is Galleon chairman while Mr Lau heads the Singapore office.

Singapore Management University's associate professor for finance Melvyn Teo said: 'If some investors bought into Galleon because of its name and long-term track record, and are worried about the uncertainty surrounding the fund, they may redeem.'

However Prof Teo said that the underlying asset values are not likely to deteriorate quickly as they are not tainted by the insider trading scandal.

Things have moved rapidly since Rajaratnam was arrested in New York on insider trading charges last week.

The whistle-blower who brought down the hedge fund has been named in some media reports as Ms Roomy Khan, a former Galleon employee.

She taped conversations with Rajaratnam and told prosecutors that she had provided inside information about stocks.

Ms Khan, who has had a history of financial trouble, has agreed to plead guilty to conspiracy and securities fraud.

This article was first published in The Straits Times.