View Full Version : Hedge Funds Making Big Bets on Gold

19th May 2009, 06:54
Hedge Funds Making Big Bets on Gold

By Joseph Checkler

NEW YORK -(Dow Jones)- Hedge fund firms Paulson & Co. and Lone Pine Capital made big bets on gold during the first quarter, becoming the No. 1 and No. 2 shareholders, respectively, in the SPDR Gold Trust (GLD) exchange-traded fund, according to regulatory filings.

Paulson & Co. - run by John Paulson, who had already been beefing up his exposure to gold companies - bought 31.5 million shares of the ETF during the first quarter, according to its mandatory end-of-first-quarter holdings report with the Securities and Exchange Commission. That stake would be worth more than $2.8 billion if Paulson still holds all those shares at present.

Stephen Mandel's Lone Pine bought 26.5 million shares of the ETF, which would be worth $2.4 billion if it still holds those shares. Lone Pine didn't immediately return a message seeking comment.

Many hedge fund managers have been increasing their gold investments lately. More than 28% of the SPDR Gold Trust ETF's outstanding stock was owned by hedge funds as of the end of the first quarter, according to Factset Research Systems.

The increased bets on gold come as the price of the yellow metal have remained high, above $900 an ounce. Funds also see hard assets as insurance against further turmoil in the financial system, including a decline in the value of paper currency.

Most active investing in gold has been by Paulson.

In March, Paulson paid $1.3 billion to buy Anglo American PLC's (AAUK) remaining stake in South African miner AngloGold Ashanti Ltd. (AU). Paulson also recently introduced to investors a new share class pegged on the price of gold.

David Einhorn of Greenlight Capital, who had also been buying more gold-exposed stocks, added to his SPDR Gold Trust position during the first quarter as well.

Paulson, a merger arbitrager by trade, became the highest-paid hedge fund manager in 2007 when he bet against securities tied to subprime mortgages. His funds also produced double-digit gains in 2008, when the industry as a whole showed an average loss of 19%, according to Hedge Fund Research.

Mandel's Lone Pine, which according to Factset now has almost 20% of its equity portfolio in the ETF, stumbled last September along with other hedge funds. The firm, however, was not among the funds reported to have barred investors from withdrawing money from its funds.

By Joseph Checkler, Dow Jones Newswires; 201-938-4297; joseph.checkler@dowjones.com

(END) Dow Jones Newswires

05-18-09 1519ET

Copyright (c) 2009 Dow Jones & Company, Inc.

10th June 2009, 15:25
Old news, but good to post for those who havent seen it. Big issue - when they decide to leave, price may get whipsawed if you're in GLD. That effect might be a good Buy signal if spot gets pushed down as well as share price.