Gold News

Hedge-Fund Losses Force Gold ETF Sales

A RAFT of big-name US hedge funds cut or quit their Gold ETF positions in the last 3 months of 2011, new data showed Tuesday, as the precious metal extended its most volatile period since the Lehman Brother's collapse of 2008.

Paulson & Co. reduced by 15% its $3.2bn position in the SPDR Gold Trust, which it uses to back shares in its own gold-denominated fund, reflecting "client redemptions" according to analysts quoted by Reuters and Bloomberg.

Vinik Asset Management in Boston, which manages some $6bn in total, cut its $500m position in the same Gold ETF by more than one fifth, while Connecticut-based Tudor Investment, which manages some $11bn, sold all of its $32m position in the trust.

Touradji Capital in New York also sold its entire position in that Gold ETF – a $7m holding bought by the $6bn asset manager in the preceding three months, as gold prices hit all-time record highs. The metal ended December almost 20% below September's peak.

Once the hedge funds' sales were completed by end-December, the Gold Price then enjoyed its strongest 1-month gain since 1999, rising by 11% against the US Dollar.

Touradji's flagship fund lost its investors 14% last year, according to the Wall Street Journal, with assets under management shrinking from to around $1bn from $1.6bn after clients were invited to redeem early if they wished in September.

Delivering a 51% loss in 2011 on its Advantage Plus Fund, Paulson & Co. cut its entire holdings in Citigroup and Bank of America during the fourth quarter, a period which saw the banks' stock prices average losses of 25% and 50% respectively from 2009, when the hedge fund first began building its position.

Bank of America's stock price has jumped from $5.80 to more than $8 since Paulson completed its sale by end-December.

This week's new 13F filings to US regulators meantime show that the Soros Fund doubled the number of SPDR gold shares it held during the fourth quarter of 2011, building a position now worth around $13 million whilst cutting its exposure to Gold Mining stocks.

Soros famously sold 99% of its Gold ETF position in the first quarter of 2011, when the price was 20% lower on average than during the last 6 months of the year.

Bond-giant Pimco and the Teacher Retirement System of Texas also grew their Gold ETF holdings between October and January. Overall, the volume of Gold Bullion needed to back shares in the SPDR Gold Trust swelled by 2% to 1254 tonnes.

The trust's gold holding has since risen a further 24 tonnes. Stored at HSBC bank vaults in London, it is currently worth some $71bn. The trust, which is traded on the New York, Tokyo, Hong Kong and Singapore stock exchanges, and which briefly overtook the SPY trust-fund as the world's largest ETF by value last year, charges its shareholders 0.40% in annual management fees.

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