In recent months anxiety over the viability of the economic recovery has built gradually, with more and more bears seemingly emerging from hibernation with each underwhelming data release. And based on where the smart money seems to be flowing, perhaps there is major cause for concern; some of the most successful investors have established huge positions in gold ETFs, often viewed as a safe haven in difficult economic environments [see Five Safe Haven ETF Ideas].
The SEC requires money managers who oversee more than $100 million in U.S. equities to report their holdings on a Form 13F within 45 days of the end of each quarter. The filing must include all holdings in stocks that trade on U.S. exchanges, as well as options and convertible debt. According to these filings, several well-known hedge fund managers have accumulated massive positions in the SPDR Gold Trust (GLD), one of the largest exchange-traded products by total assets in the world [for more ETF ideas, sign up for our free ETF newsletter].
Hedge fund manager George Soros is respected as an investor with an impressive track record of turning big profits in tumultuous environments, including a legendary $1 billion day during an attack on the British pound. And during these uncertain times, GLD seems to be one of Soros’ most popular positions; according to a recent 13-F filing, the position in GLD for Soros Fund Management stood at more than $635 million at the end of the second quarter. Soros maintained a number of additional gold-related positions, including a little more than $1 million in the Market Vectors Gold Miners ETF (GDX) and $360,000 in the Junior Gold Miners ETF (GDXJ).
John Paulson, who gained notoriety after raking in about $20 billion between 2007 and 2009 by betting against the housing market and financial companies, is perhaps the world’s biggest gold bug. In addition to major positions in gold miners, the man behind Paulson & Co. has been dialing up his position in GLD; according to the 13-F filing made in August, the firm’s position in GLD stood at more than $3.8 billion at the end of the second quarter, an astronomical total that rivals the foreign reserve holdings of some smaller countries. Paulson began making a more significant shift to gold in late 2009, meaning that he has likely recorded some big gains already in 2010 as the precious metal has climbed to new highs.
One additional interesting note about Paulson’s filing: GLD was the only ETF included in the list.
Eric Mindich has apparently decided that Soros and Paulson are on to something, as the former Goldman Sachs trader (and now hedge fund manager) has accumulated a massive position in the gold SPDR over the last several months. According to the most recent 13-F filing, Eton Park Capital Management brought its total exposure in GLD up to more than $800 million at the end of June, making Mindich one of the biggest buyers of gold in the second quarter.
Eton Park also bought about $600 million worth of GLD calls and nearly $500 million worth of GLD puts, a strategy not all that unusual for the arbitrage-based fund.
David Einhorn, one of the first money managers to publicly warn about Lehman Brothers, is also on the gold bandwagon. Einhorn has expressed concern about depreciation in paper currencies as a result of loose lending standards, and sees gold as a way to capitalize on that trend. According to a recent letter to shareholders, Greenlight returned more than 4% in August, thanks in large part to its bet on gold. The recent filing for Greenlight didn’t include any mention of physically-backed gold ETFs, but this money manager did have more than $100 million in the Market Vectors Gold Miners ETF (GDX).
Switch To IAU?
GLD seems to be the gold ETF of choice for the aforementioned hedge fund managers; the positions highlighted above are greater in aggregate than the total assets of the two other physically backed gold ETFs, IAU and SGOL. It will be interesting to see if the recent reduction in expense ratio on iShares’ IAU will sway any of the big players to make a switch. On Paulson’s GLD position of nearly $4 billion, the annual expense works out to about $15 million, or nearly $6 million than the firm would incur annually by investing in the nearly identical IAU. Perhaps that’s pocket change for someone with some $30 billion under management, but it seems like an easy opportunity to boost bottom line return.
Disclosure: No positions at time of writing.