In August of 2006, Jim Clark—the founder of Netscape and Silicon Graphics—met with Paulson & Co founder John Paulson. Clark was impressed by Paulson’s plans to short the subprime mortgage market. But when he spoke with his advisors at Goldman, they talked him out of investing with Paulson, who they described as a bit player.
The next year, Paulson’s flagship fund generated a 590 percent return.
At the same time they were discouraging Clark from investing with Paulson, Goldman was helping Paulson put together the Abacus CDOs that would help Paulson garner those eye-popping returns.
That’s one of the revelations in Richard Teitlebaum’s far ranging cover story in Bloomberg Markets magazine.
“When it came out that Paulson had the biggest payday in history, I got angry,” Clark says. The fact that Goldman Sachs had such a close relationship with Paulson incensed Clark further.
“They just butter their own bread and charge huge fees, these jerks,” Clark says.
Clark is no doubt not alone. GSAM manages most of the $840 billion in assets under management by Goldman, according to Teitlebaum. That’s more than many of the biggest names in wealth management. But the combination of subpar results for most clients with stellar results from some Goldman clients like Paulson, is giving rise to unhappiness.
It won’t help Goldman to have a high profile investor like Clark so publicly excoriating the firm. Other wealthy investors are likely to look at their Goldman accounts and wonder if they should follow Clark’s lead and pull out their money.
One source of security for GSAM, however, is that a large portion of its assets under management belong to current and former Goldman executives. That money is unlikely to leave the firm.
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