The Wall Street Journal's Gregory Zuckerman has a fascinating article about the latest indignity associated with hedge fund manager John Paulson: In anticipation that Mr. Paulson will have to sell some of his extensive holdings to meet redemptions, rivals are scouring his positions to see which are the most likely to go overboard.
If true, the moves could have a profound impact on some stocks, bonds and other assets in the weeks ahead. As the article noted, most investors in Mr. Paulson's funds have to tell him by the end of October if they want their money returned by the end of the year.
While there is no indication yet that investors are heading toward the exits, the poor performance of Mr. Paulson's funds suggest that it could happen. This year, his big bets on Sino-Forest Corp., Hewlett-Packard Co. and U.S. financials have soured, and his stake in the world's biggest gold exchange-traded fund – the SPDR Gold ETF – retreated about 13 per cent in September. Add it up, and it isn't hard to come to the conclusion that some investors may be disillusioned with Mr. Paulson's investment prowess, established a couple of years ago when he scored $20-billion (U.S.) betting against the U.S. housing market.
According to Gurufocus.com, his top 10 equity holdings are: the SPDR Gold ETF , Anglogold Ashanti Ltd. , Citigroup Inc. , Anadarko Petroleum Corp. , Transocean Inc. , Capital One Financial , Hartford Financial Services Group Inc. , Wells Fargo & Co. , Hewlett-Packard and Suntrust Banks .
Theoretically, these stocks could fall if Mr. Paulson scales back his bets to meet redemptions, and some investors clearly want to get ahead of that trade, given the enormous size of Mr. Paulson's $29-billion portfolio. However, the Wall Street Journal article emphasizes his holdings of Lehman Brothers bonds.
David Berman