Is Singapore the best place for Galleon’s funds?

New York-based hedge fund manager Galleon Group is setting up a Singapore operation to manage its $1.1 billion Asian long/short equity fund and to venture into new businesses, industry sources said.

The hedge fund manager, which has invested a total of $7.5 billion in technology, healthcare, financials, consumer and private equity, is in the process of hiring Asian experts for its regional operation, the sources told Reuters.

The company, set up by Sri Lankan-born Raj Rajaratnam in 1997, has been investing in Asia for the last 10 years, but in 2006 it launched a Asian long/short fund -- which can profit in both falling and rising markets.

The fund will be managed by the Singapore team, one source with direct knowledge of the plans said.

Galleon declined to comment.

The move underscores Singapore's growing importance as an Asian hedge fund centre.

“It is easier to set up an office in Singapore for hedge funds as well as for service providers,” said Rajeev Baddepudi, an analyst at consultancy Eurekahedge. “It has the advantage of better access to the key regional markets such as India.”Last year Swiss-based RMF, which is part of the Man Group and manages fund of hedge funds, moved its Asia headquarters to Singapore from Tokyo, citing Singapore's attractive regulatory climate, international environment, and better lifestyle for its employees.

Another draw is Singapore's two big state-backed investment firms: Temasek and Government of Singapore Investment Corporation (GIC), which manages Singapore's reserves.
Temasek and the GIC have assets of $120 billion and over $100 billion respectively, and many of the fund managers who flock to Singapore compete for the mandates to invest the portion that is placed with independent investment firms.

But this year's market turmoil has undermined returns at Asian-focused hedge funds, which manage $156 billion according to Eurekahedge.

After producing five straight years of double-digit percentage gains, the Eurekahedge Asian Hedge Fund Index is down 7.9 percent this year up to March. This compares with declines of 1.7 percent and 3.2 percent respectively in its North American and European indexes.

With all these challenges, will Galleon succeed in managing its funds and venturing into new businesses in Singapore?