November 15, 2011 1:19 am

Paulson cuts gold fund holding

John Paulson, the billionaire investor, cut his holdings of a popular gold exchange-traded fund during the third quarter.

News of the shift came in regulatory filings released on Monday, which also showed that Mr Paulson owned 1.8 per cent of News Corp class B shares at the end of September, a stake worth $256m.

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The hedge fund manager is now the third-largest holder of voting rights in the media conglomerate, behind the Murdoch family and Prince Alwaleed bin Talal, the Saudi investor who controls 7 per cent.

Mr Paulson sold a third of his holdings in the SPDR gold trust in the third quarter, but his $30bn hedge fund was still the largest holder of the ETF at the end of September, with a stake worth $3.5bn at the current gold price of $1,779 an ounce.

Mr Paulson’s Gold hedge fund, his smallest, has been a rare positive for a manager facing severe losses in his flagship funds, returning 9.75 per cent for the year to the end of October, according to investors.

However, Mr Paulson also uses the ETF and other derivatives linked to the price of gold to allow his investors to denominate their holdings in the precious metal, rather than US dollars.

A person familiar with the firm said that the sale may reflect the relative cost of different securities used to create the gold share class, rather than an overall reduction in Mr Paulson’s exposure to gold.

During the quarter, Mr Paulson also reduced his stake in some companies that have contributed to losses at his hedge funds. He sold about a third of his stake in Hewlett-Packard, shares worth $230m. He also cut his holdings of Wells Fargo and Citigroup by a similar amount, selling stock worth $496m.

However, Mr Paulson slightly increased his stake in Bank of America, bringing the value of his holding to $400m.

Mr Paulson joins hedge fund peers Elliot Management and the Baupost Group, which also built stakes in News Corp during a volatile three months in which the company’s stock was first hit by the phone-hacking scandal and then boosted by a $2bn share buy-back.

Paulson & Co also sold almost half its stake in News Corp’s non-voting stock during the quarter, to leave his hedge fund with a $91m position in the class A shares.

Mr Paulson, also purchased 6.6 per cent of Nalco, a water treatment group, worth $357m, and made a $350m investment in the shares of Motorola Mobility, the handset business to be acquired by Google.

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