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tion technology. The health-care fund, started in October 1994, has grown to $1.2 billion.

In biotechnology, Galleon is focusing on companies with products experiencing accelerating growth and companies with products in late-stage clinical trials that are underappreciated. In genomics, the firm focuses on infrastructure companies that will benefit from the focus on gene validation and do not have associated patent issues. In health-care services, the view is that health-care providers will do well with premiums up over 10 percent. Galleon also believes the margins for drug distributors are poised to expand. The firm is selective with brand-name pharmaceuticals. In medical devices/hospital supplies, it is neutral toward cardiology companies since the U.S. stent market is maturing. And in health-care information technology, it is net short traditional companies and those disintermediated by Internet-based solutions.

The Galleon New Media Fund, formed in June 1999 to invest exclusively in the Internet sector, is now at $500 million. Given the early stage of market development, most Internet stocks are volatile. As a result, this fund has a higher risk/return profile than the flagship technology fund. The core belief that shapes the investment strategy is that in the Internet sector, there will be a few large winners and many losers. The strategy is to identify those few large winners, build investment positions in them over time, and trade around these core positions to decrease the volatility as well as enhance returns. Galleon shorts companies whose business models are fundamentally flawed or where the demand drivers are moderating.

The firm segments the Internet sector into five subsectors: Internet infrastructure, Internet software, business-to-consumer, business-to-business, and Internet consulting services. Galleon believes the Internet infrastructure, Internet software, and business-to-business are the areas with attractive return. The driving trends are rapid deployment of information technology budgets away from Y2K-related exposure to e-business strategies among the Fortune 2000 companies. The shorts are in the business-to-consumer and Internet consulting services sectors. Worries over dot-com companies being able to obtain adequate funding and the softening demand for Internet-related advertising caused the fall in stock.

The newest fund, the communications fund begun in July 2000, is already at $125 million. The Galleon Communications Fund focuses