Hedge Fund and Private Equity Executives on the Forbes 400 List of Wealthiest Americans

Double-dip recessions, sovereign debt crises and political gridlock notwithstanding, it's been a good year for hedge fund billionaires.

Alternative investments players make up some 16% of this year's Forbes 400 list of the wealthiest Americans. One of them even cracks the top 10: George Soros, who is now a retired hedge fund manager, did very well for himself in Soros Fund Management's last year of managing money for outside investors. Soros' fortune now totals $22 billion, up almost $8 billion from last year and good enough for seventh place on the list.

No other hedge fund or private equity honcho cracked that elite group, but 18 others made the top 100. And most of them boast larger fortunes than last year, some of them significantly larger.

Despite his miserable year, Paulson & Co.'s John Paulson remains the second-richest hedge fund manager in the country, with a $15.5 billion fortune, 17th on the list and $3.1 billion higher than a year ago. Dell Inc. and MSD Capital founder Michael Dell was one spot behind with $15 billion, followed by Soros' fellow retiree Carl Icahn in 25th place with $13 billion ($2 billion more than last year), Ronald Perelman in 26th with $12 billion ($1 billion more) and James Simons in 30th with $10.6 billion ($1.9 billion more).

Steven Cohen was 35th on the list with $8.3 billion ($1 billion more than last year), Ray Dalio 44th with $6.6 billion (up $1.6 billion), David Tepper in 60th with $5 billion (up $700 million) and Stephen Schwarzman and Sam Zell in 66th with $4.7 billion (up $600 million and $300 million, respectively). Another hedge fund retiree, Caxton Associates' Bruce Kovner, was in 74th place with $4.3 billion ($200 million more than last year).

Two alternatives players dropped off the list this year. Blackstone Group co-founder Peter Peterson has given away a huge chunk of his fortune over the past year, while Maverick Capital Management's Samuel Wyly, who just made the cut last year, fell short this year. Wyly is facing Securities and Exchange Commission fraud charges and this year lost his brother and business partner, Charles Wyly, in a car accident. 

(Source: FINAlternatives, Oct 3, 2011)

Hedge Fund and Private Equity Executives
on the Forbes 400 List of Wealthiest Americans

rank	billionaire	firm	net worth
7	George Soros	Soros Fund Management	$22 billion
17	John Paulson	Paulson & Co.	$15.5 billion
18	Michael Dell	MSD Capital	$15 billion
25	Carl Icahn	Icahn Enterprises	$13 billion
26	Ronald Perelman	MacAndrews & Forbes	$12 billion
30	James Simons	Renaissance Technologies	$10.6 billion
35	Steven Cohen	SAC Capital Advisors	$8.3 billion
44	Ray Dalio	Bridgewater Associates	$6.6 billion
60	David Tepper	Appaloosa Management	$5 billion
66	Stephen Schwarzman	The Blackstone Group	$4.7 billion
66	Samuel Zell	Equity Group Investments	$4.7 billion
73	Bruce Kovner	Caxton Associates	$4.3 billion
75	Daniel Ziff	Och-Ziff Capital Management	$4.2 billion
75	Dirk Ziff	Och-Ziff Capital Management	$4.2 billion
75	Robert Ziff	Och-Ziff Capital Management	$4.2 billion
86	Henry Kravis	Kohlberg Kravis Roberts	$3.7 billion
88	Robert Bass	Oak Hill Capital Management	$3.6 billion
91	John Arnold	Centaurus Energy	$3.5 billion
96	George Roberts	Kohlberg Kravis Roberts	$3.4 billion
107	Leon Black	Apollo Management	$3.2 billion
107	Ron Burkle	Yucaipa Cos.	$3.2 billion
107	Paul Tudor Jones	Apollo Management	$3.2 billion
117	Edward Lampert	ESL Investments	$3 billion
139	William Conway	The Carlyle Group	$2.7 billion
139	Daniel D'Aniello	The Carlyle Group	$2.7 billion
139	David Rubenstein	The Carlyle Group	$2.7 billion
150	Daniel Och	Och-Ziff Capital Management	$2.6 billion
159	Stanley Druckenmiller	Duquense Capital Management	$2.5 billion
159	Tom Gores	Platinum Equity	$2.5 billion
166	Julian Robertson	Tiger Management	$2.4 billion
171	Nicolas Berggruen	Alpha Investment Management	$2.3 billion
171	Kenneth Griffin	Citadel Investment Group	$2.3 billion
188	Philip Falcone	Harbinger Capital Management	$2.2 billion
188	Henry Hillman	Hillman Cos.	$2.2 billion
200	Israel Englander	Millenium Partners	$2.1 billion
200	Wilbur Ross	W.L. Ross & Co.	$2.1 billion
200	David Shaw	D.E. Shaw Group	$2.1 billion
227	David Bonderman	Texas Pacific Group	$1.9 billion
227	James Coulter	Texas Pacific Group	$1.9 billion
227	Alec Gores	Gores Technology Group	$1.9 billion
242	Leon Cooperman	Omega Advisors	$1.8 billion
242	Theodore Forstmann	Forstmann Little	$1.8 billion
260	George Argyros	Westar Capital	$1.75 billion
273	Glenn Dubin	Highbridge Capital Management	$1.6 billion
273	Noam Gottesman	Man Group	$1.6 billion
273	Bruce Karsh	Oaktree Capital Management	$1.6 billion
273	Howard Marks	Oaktree Capital Management	$1.6 billion
293	Stephen Mandel	Lone Pine Capital	$1.5 billion
293	Jonathan Nelson	Providence Equity Partners	$1.5 billion
293	Peter Thiel	Clarium Capital Management	$1.5 billion
309	Joshua Harris	Apollo Management	$1.45 billion
309	T. Boone Pickens	BP Capital	$1.45 billion
309	Marc Rowan	Apollo Management	$1.45 billion
312	Louis Bacon	Moore Capital Management	$1.4 billion
312	Thomas Lee	Lee Equity Partners	$1.4 billion
331	Richard Chilton	Chilton Investment Co.	$1.3 billion
331	Marc Lasry	Avenue Capital Management	$1.3 billion
331	Thomas Steyer	Farallon Capital Management	$1.3 billion
359	James Dinan	York Capital Management	$1.2 billion
359	C. Dean Metropoulos	Metropoulos & Co.	$1.2 billion
359	Nelson Peltz	Trian Partners	$1.2 billion
359	Henry Swicea	Highbridge Capital Management	$1.2 billion
375	Thomas Barrack	Colony Capital	$1.1 billion
375	John Henry	John W. Henry & Co.	$1.1 billion

Reflection Series: Rick Bookstaber's Veiw on Gold.

The Gold Bubble
by Rick Bookstaber, on March 8, 2010

This represents my personal opinion, not the views of the SEC or its staff.

I am not going to spend time here talking about how the price of gold is off-the-wall, that it is not just a bubble in the making, but a bubble waiting to burst. I don’t want to waste your time on that point.We all know it is a bubble.

George Soros has said “The ultimate asset bubble is gold”. Many of the top asset managers, such as Tudor and Paulson, are piling on; Paul Tudor Jones recently said gold “has its time and place, and now is that time.” The banks are echoing this view with their research. Goldman has a research piece that looks for gold to approach $1,400 in the next year. The more ebullient Charles Morris of HSBC has said, “I absolutely believe it’s heading into a bubble, but that’s why you buy it. ” He, along with a number of other professional and otherwise rational managers, looks for gold to move as high as $5,000 an ounce.

More interesting than this almost universal agreement is what that agreement tells us about the dynamics of the market.

The Naked Bubble

Usually the markets have the courtesy of giving cover for bubbles. We adorn the bubbles with some justification. Even if a guy is just after sex, he at least has the decency to act like there is some substance behind his interest. For the Internet bubble, it was that fundamental analysis based on the brick and mortar world did not bear relevance in the New Paradigm. For the Nikkei bubble, it was that the crazy P/E ratios were not considering one subtlety or another in the Japanese accounting system.

But with gold, no one seems even to care about giving a justification, other than “gold has been a store of value throughout 5,000 years of monetary history”. Which is fine as far as it goes, but that doesn’t say anything about what the price of that store of value should be.

Pump and Dump
Given that “hedge fund” and “highly secretive” are usually said in the same breath, don’t you get suspicious when so many of the top managers are so vocally out there about their gold investments? And when their positions are structured in a way that make them open to view? Paulson and Soros have huge positions in gold ETFs. We know that, because if you buy ETFs, they show up in your 13-F filing. Granted, with an equity investment you can’t help putting that information out into the market, but with an asset there are plenty of ways to take the position without signaling it.

That they are taking a highly visible route to their positions suggests the game that is being played is one of leading the herd. The 13-F reports positions with a big lag, so no one will notice if they quietly slip out the side door while the party is still hopping. And how about when the view is backed up by none other than Goldman Sachs? Will they let everyone know when they think it has gone too far before they get out. Or before they go short? Maybe they already have.

Herds, crowds, mobs, and the Top Ten
And yet, we follow the herd, as we have countless times in the past. Herding is a timeless and universal market behavior, but one that seems less than rational. It is broader than markets; think of the Top Ten phenomenon. We feel better if a lot of other people think that our favorite artist or actor is The Best. We like a song better if we know a lot of other people are liking it as well. Thus our love affair with lists. Magazines featuring the Ten Sexiest, the Five Best, the 100 Whatever are all best sellers, even if the list is the product of a story meeting between an editor and five reporters.

Herding can be explained as an artifact of what was rational behavior in earlier times, when we were running around as hunter gatherers. Back then, mob and herding behavior made sense. Mob behavior if attacking a competitive group or killing a large animal; herding behavior if protecting against predators or uprooting to a new location. Whatever it was that got started, you could be pretty sure there was safety in having a crowd on hand to finish it.

The very notion of mobs and herds evokes a certain spontaneity. But with the gold bubble, we are moving on to a concept of herding by appointment. Everyone seems to be happy in agreeing that this is a bubble, and we are all going to participate in this bubble in a rational, genteel way. We have all decided that this is going to be a number one hit, a Top Ten. Though we might want to ask who is leading this herd, because my bet is they will be stepping aside and cheering us over the cliff

Blaming Merrill Might Set Goldman Sachs Free: Michael Lewis

To: Lloyd Blankfein Re: Winning at Ethics, the Goldman Way

I have reviewed no less than seven times your entire episode on Charlie Rose.

Your artful simplicity, studied humility and former hairline all positively radiated against the set’s dark background.

As one of my lesser colleagues on the desk marveled, “Lloyd seemed almost human: Why?” To which I replied, evenly: “because he finally read my last memo.”

Of course there was no reason you should look to one of your own traders for advice. But now that you have, we must proceed quickly. American public opinion is volatile; our exposure to it is peaking, and it will be more difficult than usual to create the illusion for American mortals (or as we like to call them, “The Morts”) that our business is in their interest, much less that we share anything in common.

This time, please, do not wait five months to internalize my new action items. They are:

No. 1: Implicate the rest of Wall Street, as quickly as possible.

It’s always unnatural to hear the name of Goldman Sachs in the same sentence as Deutsche Bank, much less Merrill Lynch. We must put aside our revulsion. The American people might enjoy seeing one firm being driven out of business by a criminal investigation. They’re less likely to allow for the destruction of every big Wall Street firm. They just forked over trillions to keep them afloat.

Delicate Decency

This job of putting our behavior in a new context -- comparing it not to some broad universal standard of “decency” but to Wall Street standards -- must be done delicately.

For example I was once hauled before a second-grade teacher and simply shouted, “You ill-paid, third-rate moron! I did nothing worse than what every other kid was doing! It is illogical not to punish them, too!”

The outburst did nothing to alleviate my situation, and probably made it more difficult than it needed to be for me to gain entry to Princeton. But the episode taught me one of the central tenets of the Goldman Way: far better to rig a system than to fight it.

Helpful Walks

Our public relations staff might quietly and helpfully walk even hostile reporters through some of the deals created by these other firms. Ditto our lawyers in their meetings with the Securities and Exchange Commission.

No. 2: Continue to use Warren Buffett, but don’t forget to pay him.

When Warren said that stuff the other day about wishing you had a twin brother so he could employ you both, he didn’t mean it as a sign of his undying admiration for you.

Remember: He said almost exactly the same sort of things about John Gutfreund, after Gutfreund had given him a sweet deal to rescue Salomon Brothers from oblivion. The moment Warren was forced to choose between Gutfreund and his money, he chose his money.

Don’t force him to make that choice. If you want more loud character references from Warren Buffett (you do) you must insure that he continues to think of you as profitable.

I don’t know if there are ways Goldman Sachs might simply give money to Berkshire Hathaway for free, but we should explore the possibility.

Hide the Props

No. 3: Hide, and hide from, the prop group.

If you must be seen in public with Goldman employees, make sure they are bankers and brokers, and not our proprietary traders. You did an excellent job on Charlie Rose of making it seem the prop group didn’t even exist.

We were mere “market makers” who helped our customers “get the risk they wanted.”

At the same time, but for different reasons, you should limit your private interaction with the prop traders, especially Jonathan Egol.

The SEC’s complaint focused on one of Jonathan’s Abacus deals and yet failed even to mention Jonathan. Instead they fingered the French guy.

At first I took it as just another sign of Mort stupidity. But now that the Justice Department has gotten involved, and is combing through all the Abacus deals, I wonder. Why is no one yet talking about Jonathan? Why is no one making noises about the deals structured for Jonathan -- and not John Paulson -- to short them? Is it possible that Jonathan has been helping them to understand our business? Just saying...

Our French Problem

No. 4: You need to address our French problem.

In a matter of weeks Fabrice Tourre has gone from non- entity to a potential asset (a “rogue trader” who might have gone quietly so that the firm might survive) to a huge liability (hero on Wall Street, who somehow has managed to portray himself as both a religious martyr and a mere cog in our machine.)

Going forward I suggest that our personnel department reexamine the French male’s ability to subordinate himself. In English there is no “I” in team. It turns out that the French use a different word: equipe.

Our international people should have known this. At the very least they should have been queasy about hiring guys who look as if they’d rather be wearing espadrilles.

‘Things Like Ethics’

No. 5: Be careful not to say or do anything now that will constrain our ability, after this crisis has passed, to do whatever we want.

The other day, on your emergency conference call with our customers, you said that you wanted Goldman to be seen as a “leader in things like ethics.”

I couldn’t have put it better myself. If in the future we fail to be a leader in ethics we can point to your statement as evidence that we never intended to be a leader in ethics, merely in “things like ethics.”

To that end, I intend to compile a list of things like ethics, in which we might strive to be a leader, without risk to our profitability.

(Michael Lewis, most recently author of the best-selling “The Big Short,” is a columnist for Bloomberg News. The opinions expressed are his own.)

(from Bloomberg, May 12, 2010)

John Paulson's big call: a V-shaped recovery and a major housing recovery

CNBC reports that John Paulson just held a conference call with investors after announcing solid April returns.

His big call: he's predicting a V-shaped recovery and a major housing recovery.

Specifically, he sees prices rising 3-5% in 2010 and 8-12% in 2011.

But this isn't much of a shock. Paulson recently launched a housing recovery fund through which he's making significant bets on rising prices in the west.

(from business insider, May 10, 2010)

Paolo Pellegrini's Testimony Could Undercut SEC Charge Against Goldman

CNBC's Steve Liesman reports: The SEC has testimony from Paolo Pellegrini, who negotiated the deal with ACA, that could contradict SEC's claims against Goldman Sachs. Paolo Pellegrini, ex right hand of Paulson, told ACA that he chose the portfolio of CDOs based on the low FICA score and high debt-to-value ratio. His intent to short the portfolio was clear and hard to miss.

Watch Steve Liesman discussing the case

Background:
Pellegrini is the Rome-born analyst who helped hedge fund operator John Paulson to make a ton of money on the subprime crash in 2007 and 2008. Pellegrini and his colleagues crunched tons of U.S. mortgage data, concluded that housing prices were due for a collapse, and invested accordingly. Paulson made over $3.5 billion on the trade. Pellegrini, is now investing his personal money via his firm PSQR Capital.
Paulson Protege Pellegrini on Bernanke's Fed: "Sheer Lunacy" Posted by: Peter Carbonara on November 16, 2009

Paulson's investors are concerned

by Gregory Zuckerman and Jenny Strasburg

John Paulson hasn't been accused of any wrongdoing. But the hedge-fund billionaire has gone on the offensive to reassure investors that his huge firm will emerge unscathed from a case that has drawn him into a political and legal vortex.

The steps, including a conference call with about 100 investors late Monday, come amid indications from some clients that they might withdraw money from his firm after a lawsuit brought by the government against Goldman Sachs Group Inc. related to an investment created at his firm's request.

Bloomberg News

John Paulson

Investors have indicated they are concerned that scrutiny over the firm's deals may spread, including to overseas regulators. They said they wanted to protect themselves in case new information emerges that could damage the hedge fund, they say. Another issue, they say: The legal case could simply prove a distraction for Mr. Paulson.

"Some of the callers asked pointed questions, almost like a court inquisition, but most people were supportive," said Brad Alford, who runs Alpha Capital Management. "I felt reassured that he did nothing wrong."

WSJ Professional

• Swap Deals in Focus

"It's not a rush for the doors," said another investor in Paulson & Co. who has communicated with larger Paulson investors since Friday, when the government unveiled its Goldman case.

Mr. Paulson sent a letter to investors Tuesday night saying that in 2007 his firm wasn't seen as an experienced mortgage investor, and that "many of the most sophisticated investors in the world" were "more than willing to bet against us."

Mr. Paulson's firm focuses on largely liquid investments, or those that are relatively easy to sell without pushing prices much lower. Even if a number of investors ask out, the firm likely will be able to sell investments without crippling their holdings, investors say.

Some traders have been examining Mr. Paulson's top holdings and positions in which filings indicate he has been a substantial holder since the news, they say. When the news of the lawsuit broke on Friday, some of these stocks, including Conseco Inc., Cheniere Energy Inc. and AngloGold Ashanti Ltd., fell sharply.

The case has delayed the planned initial public offering of a Canadian investment fund, Propel Multi-Strategy Fund, which was formed to give individual investors exposure to two funds advised by Paulson, according to people familiar with the offering. Propel didn't respond to requests for comment.

More

• In Europe, Politicians Call for Goldman Ban
• Goldman Sachs Profit Soars as Revenue Increases
• Goldman's Tourre De-Registered in U.K.
• GOP Lawmakers Question SEC's Timing
• Recap: Goldman's Conference Call

On the Monday night conference call, some investors asked if Mr. Paulson or anyone at the firm had received a government notice of potential civil charges, called a Wells notice, according to people familiar with the call.

Mr. Paulson said no. Mr. Paulson said the case wasn't a distraction that was affecting the firm's investments, and that he was confident the public glare would abate.

On the conference call, Mr. Paulson calmly explained the trade with Goldman, which involved a "short" bet on mortgage bonds. He said that the very nature of the transaction required both a "long" and "short" investor, suggesting that investors knew that a bearish investor had bet against the deal.

Mr. Paulson suggested to clients that the large investors who purchased the Goldman deal and others relied on rating firms, and didn't do enough of their homework, investors say.

The hedge-fund firm has a deadline next Friday for investors who want to withdraw money on June 30. Paulson allows most investors to pull out four times a year, but they need to give at least 60 days notice. Investors can cancel redemptions before the end of June.

Magnetar Capital LLC, another hedge-fund firm that, like Paulson, was heavily invested in collateralized debt obligations in 2007 also has been working to reassure investors that it believes its mortgage-linked investment strategy was sound and can withstand regulatory scrutiny.

Investors in Magnetar, which oversees some $7 billion in assets, also have a deadline next week to request June withdrawals of money. The Evanston, Ill.-based firm sent an 11-page letter to investors Monday saying that it didn't control which individual assets went into CDO deals in which it invested.

It isn't clear whether ongoing scrutiny of Magnetar will rattle its investors, who have known some details of the firm's strategy for several years. An article earlier this month in news outlet ProPublica was the latest to assert that Magnetar designed deals built to fail that caused cascading losses for investors on the other side of the trades. The hedge fund's strategy was also the subject of a January 2008 Wall Street Journal article. Magnetar told investors this week that it based its mortgage-CDO strategy on statistical models, not a fundamental belief that the housing market would slide.

A Magnetar spokesman said, "Our communications with investors have been very positive and supportive."

(from WSJ, April 21, 2010)

[Abacus] A Goldman blogger round-up

by Joseph Cotterill

The weekend produced a veritable Eyjafjallajökull ash cloud of blogging and bloviating on the SEC’s filing on Friday against Goldman Sachs and its structured products trader Fabrice Tourre. Here’s the best we’ve read.

Getting shorty in CDOs

First — the key SEC charge is that Tourre allowed John Paulson to pre-select bonds in a proposed CDO and then to short them, without informing its other investors, ACA Capital included.

In a stand-out post, Steve Waldman questions the role of shorting in CDOs overall, arguing that CDOs are more akin to securities than derivatives, in terms of disclosure:

Investors in Goldman’s deal reasonably thought that they were buying a portfolio that had been carefully selected by a reputable manager whose sole interest lay in optimizing the performance of the CDO. They no more thought they were trading “against” short investors than investors in IBM or Treasury bonds do. In violation of these reasonable expectations, Goldman arranged that a party whose interests were diametrically opposed to those of investors would have significant influence over the selection of the portfolio. Goldman misrepresented that party’s role to the manager and failed to disclose the conflict of interest to investors. That’s inexcusable. Was it illegal? I don’t know, and I don’t care.

In a separate post, Steve mulls a more abstract view of whether Goldman did indeed act as a ’secret agent’ for one client to the disadvantage of another.

And was that pragmatic, let alone legal?After reading the filing, Bond Girl is cutting:

Seriously, why the hell would anyone want to be a client of Goldman Sachs after reading this?

Why would you work with a firm where employees mock the transactions they are arranging for you to purchase in emails?

Why would you work with a firm that would let someone that it knows is going to have a short position in the investment – because it helped them attain it – help structure that investment for you?

Why would you work with a firm that sees your multi-million-dollar business relationship as nothing more than collateral damage in its ultimate pursuit of fees?

This is not what investment bankers do. This is what backstabbing sociopaths do.

_____________________________

ACA and due diligence

Meanwhile, Henry Blodget and Felix Salmon squared off over whether Paulson’s prior involvement did indeed materially affect ACA’s position — or whether a ’sophisticated investor’ should have known better. Quite the ding-dong, this.

Blodget argues that there is a difference between control and influence:

Paulson did NOT have control over which securities were selected for the CDO.

This is critical. It’s also a fact that is clearly visible in the evidence the SEC provided.

The firm that DID have control over which securities were selected, ACA, was a highly sophisticated firm that analyzed securities like this for a living. It had FULL CONTROL over which securities were included in the CDO. We know this because, of the 123 bonds that Paulson proposed for the CDO, ACA only included 55 of them. In other words, ACA dinged more than half of the bonds Paulson wanted in the CDO, presumably because they did not meet ACA’s quality hurdle.

Now, did Paulson influence which securities ACA selected? Yes, he probably did. But any time someone says or does anything with respect to a security, there are lots of things that influence decisions.

Salmon calls this argument ‘pathetically unconvincing’:

Let’s remember here that in the end there were 90 securities in the CDO. Of those 90, it seems that 55 were chosen by Paulson. In other words, more than 60% of the securities in the CDO were picked, essentially, out of a stacked deck. It didn’t matter which securities ACA chose; Paulson had come up with his longlist of 123 securities precisely because all of them were particularly toxic. That’s a material fact which, if ACA had known it, would surely have sufficed to get them to exit the deal entirely.

Paul Kedrosky has the original flipbook for the ill-starred CDO, for reference.

Pivoting from that flipbook, Erik Gerding of The Conglomerate zeroes in on the SEC’s case over disclosure:

My guess is that a reasonable investor would indeed want to know that Paulson was involved in selecting the deck. What’s the support for this beyond the SEC’s Complaint? Look at the “flipbook” for the transaction provided to investors by Goldman…

It goes on at length of why ACA is a good collateral manager for the CDO. On p. 27, it includes a bullet point “Alignment of Economic Interest.” The SEC complaint zooms in on this little nugget (see Complaint Para. 38). (Note to law students: bullet points in “powerpoint” style are not only bad devices to communicate ideas, they have some itty bitty securities law problems when used to market securities. If you can’t formulate something in a complete sentence, try again.) Nowhere does the flipbook mention that the Paulson hedge fund was involved in selecting the collateral for the CDO.

But it’s far from a slam dunk, he notes. Still, Salmon has raised a wider set of questions about the Abacus deal — so this aspect will no doubt run and run as a point of bloggy contention.

(from FT, Apr 19 2010)

John Paulson on bonds and equities

John Paulson... super bull? Goodness. To some degree I find "whale watching" a bit overrated, but after being the most obvious winner of the mortgage meltdown, and then piling into gold ahead of a huge run ... Paulson's moves are watched by the investment world very closely. One of the hottest investors on the planet is now chock full of bonds - especially the moral hazard kind (i.e. backstopped by US government). And has his highest net long exposure in "a long time".

No one will be correct forever, but it does make you stand notice...especially since his success is based on actually making big macro calls rather than building an army of computers co-located as close as possible to a stock exchange, so he can surge ahead of your order by 4/1000ths of a second to make mad money.

Via Reuters:

• Billionaire hedge fund manager John Paulson said on Tuesday he still sees compelling long-term returns in equities even after their sharp run-up this year, while holding no short positions in the credit markets.
• "Today our net long exposure is perhaps the highest it has ever been in our portfolio," Paulson said during a luncheon presentation at the Japan Society.
• Paulson, who has run his own hedge fund since 1994, has become a star investor after correctly predicting the sub-prime credit crisis in 2007. That reaped him a $3 billion profit.

Stocks

• "We still find a lot of compelling long investments on the equity side," he said, citing specifically Bank of America (BAC), U.S. cable-television giant Comcast Corp (CMCSA), and Germany's HeidelbergCement AG (HEIG.DE).
• Paulson said that at the end of 2008 he viewed the credit correction as having run its course. By April he had poured cash back into the sector. "That is why we don't have any shorts in credit," he said.
• Based on his estimates of the company's (BAC) earnings potential and the expectation that loan loss provisions will start to drop in 2010, Paulson remained upbeat on the beleaguered bank. "I think the worst is behind us in terms of provisioning," Paulson said, adding: "I would expect provisioning expense to be considerably lower in 2010 versus '09 and again much lower in 2011 versus 2010."

Credit

• Given his prescient bearish call on mortgage credits, Paulson's views are widely watched for what he has in his $33 billion investment portfolio.
• He highlighted the attractive yields on credit issued by GMAC due in Sept 2011, the former General Motors automotive financing company that the U.S. government propped up at the end of 2008.
• By Paulson's thinking, the government involvement is equivalent to an explicit guarantee on GMAC's finances. (you cannot disagree with that) "So instead of buying (a) Treasury bond which yields 84 basis points, I can buy GMAC which is almost, I consider equivalent to a government bond and I can get 11 percent. That is why we have allocated so much money to this particular security," he said.

Inflation

• Even as credit and equity markets looked attractive, he did reiterate his concerns that over the long-term inflation will be a problem because the government's mountain of stimulus cash will be difficult, politically, to withdraw from the economy.
• "Therefore we are concerned about high rates of inflation in the future. As an investor I became very concerned about having my assets denominated in U.S. dollars," he said.
• "So I looked for another currency in which to denominate my assets in. I feel that gold is the best currency." "An increase in the monetary base leads to an increase in the money supply, which then leads to inflation." ('output gap' be damned... the return of the late 70s, ealry 80s only this time no Volcker in charge - only ever easy Ben)
• Paulson's combined gold and gold-related investments made up more than 46 percent of his firm's holdings at the end of the second quarter of this year. (staggering... just staggering)

Via FT.com

• "There are lots more long opportunities than short opportunities in the market. Zero interest rates are a huge tonic," he added.
• "The amount of quantitative easing has stimulated financial markets and will start to appear in the real sector," he said. This is what the US Federal Reserve hopes will happen: that easy money will lead to asset price reflation, lifting confidence and fueling a recovery in the real economy.
• ... other large positions are in Heidelberg Cement and Renault, an indirect bet on consumer demand in emerging markets.

**********************

Paulson loves gold

[Nov 19, 2009: John Paulson Set to Launch Gold Hedge Fund]
[Aug 12, 2009: John Paulson Makes Bank of America 2nd Largest Holding after Gold]
[May 16, 2009: John Paulson Continues to Pile Into Gold]
[Mar 17, 2009: John Paulson Joins David Einhorn as Gold Bug with Stake in AngloGold Ashanti (AU)]

When not in gold...

[Nov 2, 2009: Conseco - A Chance to Follow John Paulson with Less Hype?]
[Aug 12, 2009: John Paulson Makes Bank of America 2nd Largest Holding after Gold]
[Jul 9, 2009: Latest Picks and Pans from John Paulson and George Soros]
[Jan 31, 2009: Dealbook - John Paulson's Year End Review]
[Nov 18, 2008: Paulson Buying Mortgage Backed Securities]

(from SeekingAlpha, December 9, 2009)

Goldman Sachs’s Hedge Fund Report

Here’s an excellent in-depth read from Goldman Sachs tracking hedge fund movements. The majority of their data was taken from SEC filings and public disclosures. In the report, they specifically focus on hedge fund re-risking and the fact that these funds now have net long exposure near levels unseen in a long time.

Some interesting tidbits:

- Hedge funds now own 3.7% of the financial sector’s market capitalization.

- Hedge funds boosted ownership in financials by 55% on a quarter over quarter basis, to $70 billion.

- They favored Bank of America as the number of funds owning it doubled (quarter over quarter). JPMorgan Chase was the second favorite. Notable fund managers like Dan Loeb (Third Point) and John Paulson (Paulson & Co) loaded up on shares of BAC, among many other prominent managers. It really is almost astounding how many big names piled into this play over the last quarter.

Goldman Sachs Hedge Fund Monitor

John Paulson Buys a Stake in a Gold Miner

Huge success shorting mortgage backed securities made Hedge Fund Manager John Paulson famous and closely watched. Gold is widely seen as a safe haven for investors in times of financial crisis. Rather than buying gold, Marc Faber recommends and John Paulson buys gold miners. As inflation rises, so can the gold production output, keeping the gold price within certain limits. The rise in the gold production will benefit gold miners.

Mining group Anglo American said on Tuesday it had sold its remaining 11.3 percent stake in South Africa's AngloGold Ashanti for around $1.3 billion (926 million pounds).

The company, which said last month it had scrapped its final dividend and would cut 19,000 jobs in a bid to conserve cash, said in a statement the cash would go towards "general corporate purposes."

Anglo has been gradually cutting back its investment in Ashanti, and now owns no shares in the gold miner.

The latest tranche was sold to investment funds managed by U.S. group Paulson & Co, run by renowned hedge fund manager John Paulson.

Paulson made billions of dollars for himself and clients betting against sub-prime mortgages in 2007.

"We're extremely pleased that someone with John Paulson's track record and reputation has chosen AngloGold Ashanti as one of his investments through which to increase his exposure to the gold market," Ashanti CEO Mark Cutifani said in a statement.

Paulson also owns a 4.1 percent stake in Kinross Gold Corp., making the hedge fund the fourth-largest holder of the gold producer. Paulson is also the second-largest shareholder in chemical-producer Rohm & Haas Co. and has holdings in Cheniere Energy Inc.

Paulson, 53, manages about $30 billion. His Credit Opportunities Fund soared almost sixfold in 2007 on bets that subprime mortgages would plummet. Last year, his flagship fund returned 37 percent, compared with a loss of 19 percent for hedge funds on average.

The firm may have made 311 million pounds ($428 million) since September by betting against the shares of Lloyds Banking Group Plc and HBOS Plc, according to regulatory filings last week.

Gold prices have risen 3.7 percent this year compared with a 15 percent decline in the Standard & Poor’s 500 Index of the largest U.S. companies. Gold futures for April delivery fell $5.30, or 0.6 percent, to $916.70 an ounce at 3:20 p.m. on the New York Mercantile Exchange’s Comex division.

“Hard currency is coming to the fore, as evidenced by the investment choices of some of the world’s most seasoned investors,” AngloGold Ashanti Chief Executive Officer Mark Cutifani said today in an e-mailed statement.

AngloGold’s American depositary receipts, each representing one ordinary share, rose 57 cents, or 1.7 percent, to $34.27 at 3:20 p.m. in New York Stock Exchange trading. The shares have gained 24 percent this year.

AngloGold, the fourth-biggest diversified mining company, dropped 37 pence, or 3.2 percent, to 1,116 pence in London trading.

Anglo, founded in 1917 to mine the world’s biggest gold field, said in 2005 it would give up control of the gold business that helped build the Oppenheimer family’s fortune and concentrate on copper and iron ore.

It has reduced its stake from 51 percent since then, and has also spun off paper and steel units. Anglo said last month it sold 10.4 million AngloGold shares for about $280 million.

AngloGold is reducing contractual commitments to sell gold at fixed prices so as to secure more room to benefit from earning spot-market prices.

The gold producer, whose biggest mines are in South Africa, also is benefiting from declines by the rand because it pays most of its costs in the currency and sells gold for dollars.