Hedge Funds

Soros Fund Management outlines new allocations

Soros Fund Management doubles bet against S&P 500
Soros Fund Management doubles bet against S&P 500

Soros Fund Management, the asset management company founded by billionaire George Soros, has doubled its put on the stock index, according to its filing to the Securities and Exchange Commission.

The hedge fund said Monday it owned a put option of 2.1 million shares on the SPDR S&P 500 exchange-traded fund (ETF), which tracks the benchmark U.S. index, in the first quarter of 2016. Put options entitle the holder to sell an asset at a particular price. In the fourth quarter of 2015, Soros had a 1 million share put option on the ETF.

The S&P 500 index rallied sharply from the middle of February but has pared some gains this month.

Put options can be a bearish bet that an asset is going to decline. However, they can also be a hedge for a separate long position — when a fund has a separate option on which it will profit if the price of the security rises.

Billionaire investor George Soros.
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Securities filings do not require a fund to disclose all of its positions. As such, they offer a snapshot rather than a deep insight into hedge funds' investment strategies.

Mixed signals

The filing came amid mixed signals about the health of the U.S. and global economy. U.S. economic expansion slowed to 0.5 percent annualized in the first quarter from 1.4 percent in the fourth and the much-eyed nonfarm payrolls report in April showed disappointing levels of job creation.

Economic data from China, the world's second-biggest economy, has continued to disappoint as well. Industrial production, retail sales and investment data came in below expectations over the weekend, despite official stimulus measures.

Last month, Soros warned that China's debt-fueled growth bore an "eerie resemblance," to the conditions that led to the 2008 financial crisis.

Demand for gold and other precious metals are closely tied to the health of Asian economies, which are big markets for bullion. Gold was traditionally viewed as a "safe haven" bet in times of market uncertainty, akin to U.S. Treasurys or German Bunds.

The Soros fund, which is currently structured as a privately owned family office, bought 19.4 million shares in Barrick Gold in the first quarter, having previously dissolved its stake in the world's top gold mining company by production in the third quarter of 2015.


The asset management company also took out a new 1 million share stake in the first quarter in Silver Wheaton, which claims to be the world's largest precious metals streaming company.

The Soros fund also took out a 1.1 million share call option on the SPDR Gold Trust, the largest ETF tracking physical bullion. Call options entitle the bearer to buy an asset at a specified price.

Other top hedge funds acted differently. Paulson & Co, led by John Paulson, slashed its investment in SPDR Gold Trust last quarter, according to its filing to the SEC on Monday. Last quarter it held 4.8 million shares in the ETF, down from 5.8 million shares in the last three months of 2015.

Tech stocks

Soros Fund Management also cut its stakes in some of the world's biggest technology stocks.

It cuts its class-A shares of Alphabet, the parent company of Google, to 6,637 in the first quarter from 65,570 in the fourth quarter of 2015. Plus, it roughly halved it holding of Facebook shares to 442,696 from 816,761.

It dissolved its call on Alibaba Group Holdings and added a small stake of 3,100 shares in Apple.

Warren Buffett's Berkshire Hathaway brought 9.8 million shares in Apple last quarter, the company's regulatory filing showed on Monday.

Clarification: This story has been updated to clarify the data around Soros' holdings and to add relevant context.

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