Industry Updates

J. Paulson reassures investors, denies new CDO probe

Thursday, April 22, 2010

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Opalesque Industry Update – Hedge fund manager John Paulson, chairman and founder of Paulson & Co., is taking a proactive stance with his investors in the light of the American Securities and Exchange Commission’s (SEC) probe into Goldman Sachs, as he held a second conference call in a span of three days this week with his investors.

According to CNBC, the second conference call on Wednesday involved a different group of investors and mainly touched on his letter to clients sent on Tuesday that described his dealings in the mortgage markets as “transparent and open.”

Paulson’s first conference call with clients was held on Monday.

No new CDO probe
In Wednesday’s conference call, Paulson assured his investors that the U.S. government had not launched a new collateralized debt obligations (CDOs) probe into his company. “No. Nothing that’ we’re aware of,” Paulson reportedly told his clients when asked if he received any notice from the SEC.

A day earlier, Paulson sent a letter addressed to his clients, including Australian investors, and told them that his company had always been transparent and open in its dealings with the North American housing market.

Paulson also tried to distance himself from the current controversy facing global investment bank Goldman Sachs. The Abacus security marketed by the bank is being blamed as having contributed to the sub-prime housing crisis which eventually led to the world financial meltdown in 2007 to early 2009.

Paulson is still ‘king’
Paulson found an ally with Anthony Scramucci, founder and CEO of New York-based asset management firm Skybridge Capital, who dismissed speculations that Paulson “has lost his crown.”

“Although some investors are fearful, I think any chatter about a run on Paulson's fund is very exaggerated,” Scaramucci told CNBC.

Earlier, Reuters reported that some of Paulson’s clients were considering withdrawing their money from the billionaire’s hedge fund in the face of his involvement with Goldman Sachs. The investigation into Goldman Sachs also forced Paulson’s Propel Multi-Strategy Fund in Canada to delay its planned initial public offering (IPO).

Paolo Pellegrini, a former aide of Paulson, told investigators that Paulson had a limited role in selecting the securities for the failed $1bn Abacus securities that Goldman marketed. He added that the Abacus securities were the only transaction Paulson arranged with Goldman Sachs.
-Precy Dumlao

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