For Paulson, Gold Still Glitters

He's not just in for the short term trade. He's in for all the right reasons, and knows there is still much more to go..

For Paulson, Gold Still Glitters

NYTimes.com

BY AZAM AHMED

Jin Lee/Bloomberg NewsJohn A. Paulson appears to have raised his bet on gold.

You can’t accuse the hedge fund manager John A. Paulson of lacking loyalty.

Even as big-name investors like George Soros peel back their bets on gold, helping to send prices falling, Mr. Paulson, who heads the $37.5 billion hedge fund Paulson & Company, has chosen to stay the course, according to recent regulatory filings that indicate he actually increased his bets on certain companies exposed to gold.

Gold, to be sure, has treated him well. Mr. Paulson netted $5 billion in personal gains last year thanks to his heavy bet. The hedge fund manager doubled down on the precious metal in recent years, believing that the dollar would lose value.

To implement that long-term bet, he created a gold fund, which invests in gold-exposed investments like mining companies, as well as a class of shares in all of his other funds denominated in the precious metal.

The most recent sell-off, in which gold has slid about 5 percent since the start of the month, was prompted in part by heavy selling from investors like Mr. Soros and hedge funds like Eton Park Capital Management. In January, when the precious metal was taking a similar beating, Mr. Paulson’s gold fund was down 12 percent, his Advantage Fund was down more than 5 percent, and all of his gold-denominated funds were in negative territory.

The last few months may have tested his resolve.

Through April, his Advantage Fund, the largest at $18.3 billion, is down 1.2 percent in the regular share class and up 5.6 percent in the gold share class, according to an investor who spoke on condition of anonymity because the information was not public.

Figures through May were not available. A spokesman for Mr. Paulson declined to comment.

At a recent investor conference in Las Vegas, Mr. Paulson reiterated his belief that gold was not a bubble, according to notes from an investor who attended the conference. Mr. Paulson said owning gold would add to returns while also protecting against inflation. He said his funds were ready for such inflation, which he sees over the next three to five years, thanks in part to the quantitative easingpolicy of the Federal Reserve.

Mr. Paulson recently acquired more shares in AngloGold Ashanti, according to his most recent 13F filings, which reflect Paulson & Company holdings through the end of March. Mr. Paulson told investors that AngloGold Ashanti – the third-largest gold producer in the world and the largest single holding in his Advantage Fund – was the best managed gold company in the world.

At the conference, Mr. Paulson warned the 200 investors and potential clients gathered that they better be prepared to accept higher volatility for now. Mr. Paulson, who rose to fame after making billions betting against the subprime mortgage market, told them he did not see the housing market normalizing until 2013.

Mr. Paulson also said during the conference that he thought the best opportunities in the market were restructured equities – or stocks in companies that are coming out of a rough period.

While Paulson & Company has long held meetings for its investors, this is the first year the hedge fund has also held meetings for investors in individual funds. The conference was held for investors in the Advantage Fund, Mr. Paulson’s largest with about $18 billion in assets.

The lavish affair included tours of the MGM Resorts and Cesar’s Entertainment — Mr. Paulson owns stakes in both. For kicks, attendees had the option to take a helicopter ride to the Grand Canyon.

During the conference, Mr. Paulson offered some details about his fund. He crowed about the alignment of interests with his investors. That’s a complicated way to say that employee capital makes up 42 percent of the money in the fund, so everyone cares deeply about returns. Mr. Paulson’s own wealth makes up a big part of that figure.

And for those worried about the ever-present fear of succession, Mr. Paulson put them at ease. He plans to stay at the helm of his enterprise for another 15 years until he reaches age 70, investors said.

For Paulson, Gold Still Glitters - NYTimes.com

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