Level Global gives clients more exit time - source

* Level Global extends deadline for redemptions

* Investors have until end of January to submit notices

By Svea Herbst-Bayliss and Matthew Goldstein

BOSTON/NEW YORK , Dec 21 (Reuters) - Hedge fund firm Level Global Investors LP, which has been embroiled in the U.S. government's insider trading probe, will give investors more time to ask for their money back, a person familiar with the fund said.

Less than one month after the New York-based firm was raided by federal agents, it extended its deadline for redemption notices in order to give investors who might want to exit more time to make a decision.

Clients will now have until the end of January to submit redemption notices to get money back by the end of the first quarter. Traditionally investors would have had to submit those notices by the end of December.

A spokesman for Level Global did not return calls seeking comment.

Since the raid on Nov. 22, Level Global has been dogged by rumors that its employees may have improperly received nonpublic information about some technology companies.

Speculation reached a new high point late last week when the government on Thursday arrested four men and charged them with illegally passing nonpublic information to hedge fund managers. In the government's complaint, prosecutors said that illegal information was passed to a New York-based hedge fund. [ID:nN16228432]

Level Global, which oversees roughly $3 billion, manages money for a handful of pension funds, including the Massachusetts state pension fund, the New Jersey state pension fund and the Ohio teachers' pension fund.

Some of the biggest U.S. funds of funds also put money with Level Global. Since the raid, several investors have said they were "monitoring" the situation but stopped short of saying whether they planned to exit immediately.

Hours after the arrests, Level Global tried to reassure clients by reiterating that the fund is not a target of the probe and that investors were not rushing for the exits.

"Contrary to speculation in the media, redemptions have been immaterial -- amounting to less than 10 percent of our capital base," the fund said in letter that it sent to clients on Thursday. [ID:nN1682138]

According to someone familiar with the notices, who was not allowed to speak about them publicly, investors had asked for roughly $224 million back from the fund a week ago.

Still investors are likely still following the situation closely -- especially because one of the men who was arrested and charged last week, Manosha Karunatilaka, an account manager at Taiwan Semiconductor Manufacturing Co Ltd (2330.TW), had dealt with Level Global while he was acting as a consultant for expert networking firm Primary Global Research.

By extending the upcoming redemption deadline into next year, the fund's executives might hope to dissuade some investors from running for the exits at a time when there is much speculation, but few real facts, about exactly how many hedge funds might have been involved in illegal activity.

Traditionally investors, especially pension funds, tend not to wait around when a fund's name is embroiled in an insider trading scandal.

For years Level Global has been a favorite with big-name investors. The fund's co-founders, David Ganek and Anthony Chiasson, boast resumes that include working at hedge fund firm SAC Capital Management before they launched their own fund in 2003. The pair sold a minority stake in their fund to Goldman Sachs Group Inc's (GS.N) Petershill Fund, which buys equity stakes in hedge funds, earlier this year.

Ganek, 47, known for his substantial art collection which includes works by Jeff Koons and photographer Diane Arbus, is a trustee at New York's Guggenheim museum, and he and his wife are fixtures on the New York social circuit. (Editing by Gerald E. McCormick)