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"The deadline for year-end redemptions has elapsed and we have received approximately $3 billion in total redemption requests," FrontPoint co-chief executive officers Dan Waters and Mike Kelly said in a letter sent to investors on Friday.

Reuters obtained a copy of the letter.

A spokesman for FrontPoint declined to comment.

About half of the redemption requests were related to FrontPoint's healthcare portfolios, which executives decided to liquidate. The portfolios were allegedly at the heart of one of the government's probes, people familiar with the matter said.

Investors in those portfolios have already received their money back, the FrontPoint executives said in their letter.

Investor redemptions at other FrontPoint strategies, however, underscore just how nervous pension funds, endowments and wealthy individuals have become about the whiff of trouble. This week the probe picked up speed when federal agents raided three hedge funds, sent subpoenas to other fund managers, and arrested one executive at a so-called expert network company.

FrontPoint, which offers more than a dozen portfolios to investors, expects to start 2011 with roughly $5 billion in assets, down from $11 billion before the financial crisis, the letter said.

FrontPoint's biggest star is Steve Eisman, who made millions by anticipating the housing market collapse long before anyone else did. Eisman became something of a celebrity in the $1.7 trillion hedge fund world after he was featured prominently in journalist Michael Lewis' best-selling book "The Big Short," which chronicles how a savvy group of traders capitalized on the crisis.

Greenwich, Connecticut-based FrontPoint was acquired by investment bank Morgan Stanley in 2006 and is now being spun off. Morgan Stanley spokeswoman Erica Platt declined to comment on the redemptions.

But she said "We remain focused on assessing the impact of the last weeks' events and continue to work toward the restructuring of our ownership of FrontPoint."

Earlier this month, federal authorities arrested Yves Benhamou after charging that he had illegally passed on inside information to a hedge fund manager about Human Genome Sciences Inc in 2008.

Benhamou, a French doctor, was overseeing a clinical trial for the biotechnology company and was also consulting with hedge fund managers who specialized in selecting healthcare stocks.

While neither the hedge fund nor the manager was named in the government's case, people familiar with the matter said it was FrontPoint and Joseph "Chip" Skowron, a co-portfolio manager at its healthcare funds. FrontPoint put Skowron, who earned his medical degree at Yale, on leave the same day the government announced its charges against Benhamou.

The arrest of Benhamou and Don Ching Trang Chu, a former executive at an expert-network firm, suggest that the government is probing exactly how hedge funds interact with these types of industry consultants.

(Additional reporting by Elinor Comlay in New York, editing by Matthew Lewis)

U.S. biotech Genzyme (GENZ.O), the target of an $18.5 billion takeover bid by French drugmaker Sanofi-Aventis (SASY.PA), is open to linking the performance of its Campath drug to the offer, its chief executive Henri Termeer told Le Figaro in an interview.

U.S. shoppers searched for deals on high-definition televisions and popular toys early on Friday, as retailers hoped that "Black Friday" would kick off the best holiday shopping season in three years.

Resource-related stocks will be in focus as key base metals prices fell, pressured by a rise in margin requirements by the Chinese exchange that prompted liquidation of speculative positions by investors with limited funding.

European shares fell on Friday as the euro zone debt crisis intensified, with Portugal under pressure to accept a bailout. Mining companies were hit by weaker commodity prices on Chinese inflation worries.

Japan's Nikkei share average .N225 dipped 0.4 percent on Friday, held back by profit-taking after rallying nearly 10 percent so far this month on a pick-up in overseas investor demand for Japanese equities.

On Wednesday, the Dow Jones industrial average .DJI jumped 150.91 points, or 1.37 percent, to 11,187.28. The Standard & Poor's 500 Index .SPX rose 17.62 points, or 1.49 percent, to 1,198.35. The Nasdaq Composite Index .IXIC gained 48.17 points, or 1.93 percent, to 2,543.12.

(Reporting by Atul Prakash. Editing by Jane Merriman)

While some stores were open on Thursday and many retailers have offered "Black Friday" deals for weeks, shoppers still lined up late Thursday and early Friday for the annual day-after-Thanksgiving bargain hunt.

Black Friday is a term adopted by retailers to refer to the time of year when their businesses move into the black, or turns a profit. This year their aim is expected to be about keeping sales momentum that has picked up modestly this year as the economy recovers.

Shoppers were disappointed in some of the offers they could see, although they were still waiting in line for hours before they could get in the door.

"I'm looking at the TV and it says save $70 and I'm like, come on, you've got to be kidding," said Sanjay Patil, as he waited outside a Best Buy Co Inc in Princeton, New Jersey, along with about 50 other bargain hunters before midnight, even though the electronics retailer said stores open at 5 a.m.

"If it's Black Friday, it has to be 100 or 120 bucks savings minimum."

Others were anticipating the bargains they hoped to get. Nandini Ramkissoon, 19, staked out a spot near the stacks of $69 Blu-ray Disc players and $198 HDTVs set to go on sale at 5 a.m. (1000 GMT) inside a Wal-Mart in Secaucus, N.J.

"Wal-Mart is pretty good because they're letting their customers inside before time, and it's really cool," Ramkissoon said.

She and her parents arrived at 7 p.m. on Thursday, 10 hours early, to make sure they could get the TV they wanted.

Wal-Mart opened many of its U.S. discount stores on Thanksgiving Day and the doors stayed open overnight, a tactic it adopted after an employee was trampled to death two years ago on "Black Friday."

READY TO SHOP

Consumers, whose spending accounts for about 70 percent of the U.S. economy, appeared to be in the mood to shop. On Wednesday, the government reported a 0.3 percent increase in personal spending in October, compared with the previous month.

Other signs that the economy might be gaining steam include a two-year low in a closely watched measure of jobless benefits.

"I'm spending more this year than last year," said George Lum, a 30-year-old hospital worker, as he sat in a lawn chair outside the Target Corp in Princeton, 4-1/2 hours before its 4 a.m. opening. He was hoping to buy a 40-inch Westinghouse flatscreen LCD high-definition television for $298.

The National Retail Federation forecast that as many as 138 million people would go to stores this weekend. The industry trade group also forecast a 2.3 percent increase in sales during November and December, up from a 0.4 percent increase a year earlier. Other forecasts call for even greater increases.

The Financial Times Deutschland, which did not identify its sources, said some euro zone states wanted Portugal to seek aid in order to avoid Spain, the fifth largest EU economy, from having to follow suit.

"If Portugal were to use the fund, it would be good for Spain, because the country is heavily exposed to Portugal," the FT Deutschland quoted a source in Germany's finance ministry as saying.

The German Finance Ministry could not immediately be reached for comment on the FT report which suggested that despite public displays of confidence, euro area leaders were alarmed at the prospect of the debt crisis engulfing ever more of its members.

Lisbon, which is preparing to pass an austere 2011 budget later on Friday that aims to deliver tough spending cuts to ward off a deeper debt crisis, issued an emphatic denial.

"This news article is completely false, it has no foundation," said a government spokesman.

A Reuters poll this week showed 34 out of 50 analysts surveyed believe Portugal will be forced to ask for help.

Spain has already passed its own austerity budget and only four out of 50 economists surveyed by Reuters thought Madrid would seek aid.

"Those who are taking short positions against Spain are going to be mistaken," Spanish Prime Minister Jose Luis Rodriguez Zapatero said on RAC1 radio on Friday.

A rescue aimed at meeting Spain's financing needs for 2-1/2 years would cost 420 billion euros ($557 billion) according to a Capital Economics estimate, the lion's share of the 440 billion euro European Financial Stability Facility (EFSF) reserve set up by the euro zone after the Greece bailout.

But two separate EU funds, augmented with International Monetary Fund backing, could provide loans worth 750 billion euros in total.

German Bundesbank chief Axel Weber, a powerful member of the European Central Bank's governing council, said this week that the EFSF and other EU rescue funds had enough money, if needed, to cover the borrowing needs of stretched euro zone members Greece, Ireland, Portugal and Spain.

A Spanish government source told Reuters that Madrid was not pushing Lisbon to seek help, underscoring splits within the 16-nation group on how to handle the debt and deficit crisis that has seen the euro fall sharply against the dollar since May.

Markets are still acutely worried by the threat of debt crises in Greece and Ireland spreading further and have pushed the borrowing costs of Portugal and Spain to record highs..

"I think Portugal has already crossed the point of no return. Its bond yield has gone beyond a sustainable level. The market is now watching whether Spain will need a rescue," said a Japanese bank foreign exchange trader.

The Australian dollar slid after the head of the country's central bank said interest rates were about right for the near term, extinguishing speculation the currency's yield advantage would get a policy boost in the next few months.

Caution ruled in financial markets, with thinning volumes driving more stock investors to take profits in the year's winning sectors in Asia, such as consumer discretionary spending, and go to the sidelines.

The MSCI index of Asia Pacific stocks outside Japan slipped 0.3 percent .MIAPJ0000PUS, weighed down the most by a 0.8 percent fall in the consumer discretionary sector.

Powered by the view that the hunger of Asia's consumers for big-ticket items, such as cars and appliances will keep growing, this sector is still up 28 percent so far this year .MIAPJCD00PUS, making it by and far the best performer.

Japan's Nikkei share average .N225 was barely changed on the day, with strength in larger exporter shares offset by weakness in retailers and industrial stocks.

The Nikkei's 9.5 percent rise in November, driven in part by a weakening in the yen, is on course to be the biggest monthly gain since March.

Correspondingly, the U.S. dollar's 4.3 percent rise against the yen is also the steepest single-month advance since March.

Government bonds, in turn, sold off, with 10-year futures down 2.4 points in November, the biggest monthly decline since April 2008.

The December contract was down 0.3 point at its lowest since June 23, ahead of new supply of 10-year debt next week. The flows across the yield curve have been erratic, and dealers are keeping watch of cash yields of mid-maturity bonds to see if they follow the 10-years higher, which would trigger more bullish bets to be folded.

The U.S. dollar nudged up, though mainly because of weakness in other currencies.

The dollar index, a trade-weighted measure against six other major currencies, edged up 0.1 percent to 79.85. A major chart obstacle lies at 80.05, a level which served as support in April and August.

In the absence of fresh economic news, a clear break above that level will be a medium-term bullish signal for the dollar, especially if the index closes the week above 79.73, the 200-week moving average.

The Australian dollar was down 0.5 percent to US$0.9750 after Reserve Bank of Australia Governor Glenn Stevens said policy was appropriate for now, suggesting the central bank was in no hurry to tighten rates.

He later said it was not unreasonable for investors to price in a rate hike in the middle of 2011, a comfort to longer-term investors in the Australian dollar but no solace for short-term bulls who had hoped for a near-term push to parity.

(Additional reporting by IFR Analyst Takahiro Okamoto in TOKYO and Reuters FX Analyst Krishna Kumar in SYDNEY; Editing by Tomasz Janowski)