How Long Did Galleon Cheat?

Monday, November 09, 2009

Last week saw more insider trading cases brought to light as the SEC finally begins to do its job. The Pragmatic Capitalist posted some great charts a couple weeks ago. Just how long was Raj Rajaratnam was cheating the system?
Reader DanH was nice enough to forward us a recent copy of Galleon Groups performance going back to 1992. It turns out that the fund was Madoff-like in its performance. These guys just couldn’t lose. Whether the market was up or down they cranked out 25% returns like they were printing money. It makes you wonder just how long these guys were trading on insider information?

I have run the risk adjusted returns on hundreds if not thousands of portfolios throughout my career and I have never seen numbers like these. NEVER. There is virtually ZERO downside volatility in these figures. Their largest one month drawdown was [-8.54%!] That is simply unheard of for a portfolio with such high returns. Gauging from the returns I would be willing to bet the insider trading was going on for most of Galleon’s existence and was likely much more rampant than currently reported:
Galleon's returns are absolutely unheard of and the figures are astounding. There are always outliers in data such as these but after seeing the insider trading indictment, it seems clear that Raj has been cheating for years. Galleon returned somewhere around 2,700% cumulatively since the beginning of the fund while the S&P didn't even return 400%.


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