Paulson & Co. has begun a full-court press to reassure its clients that the firm is in no danger from the fraud case against Goldman Sachs that prominently features the $32 billion New York-based hedge fund.
On Monday, firm founder John Paulson spoke with about 100 investors on a conference call. Yesterday, he sent a letter defending the firm’s conduct in the collateralized debt obligation in question, which Paulson paid Goldman $15 million to structure and market.
In the letter, Paulson noted that, at the time of the transaction in April 2007, few knew who he was. “Many of the most sophisticated investors in the world” were “more than willing to bet against us,” he wrote, according to The Wall Street Journal.
It was a theme Paulson also touched on during the conference call, noting that the nature of the CDO was that there had to be a short investor betting against the residential mortgage-backed securities included in the deal.
Neither Paulson nor his fund has been accused of any wrongdoing, and no such accusations are apparently in the offing, he said on Monday. In response to a question from an investor, Paulson said no one at the firm had received a Wells notice from the Securities and Exchange Commission, which sued Goldman over the Paulson CDO on Friday. A Wells notice indicates that the regulator plans to bring an enforcement action.
While some investors have expressed concerns about the lawsuit and have indicated they might pull their investments, Paulson said the firm has not yet received any redemption notices. Clients have until next Friday to file a withdrawal request to redeem their investment at the end of June.
“It’s not a rush for the doors,” one investor who participated in the call told the Journal.
“We are interest in buying out people who want to get out of Paulson, but so far no one has stepped forward,” another told Reuters.
Paulson earned nearly half of its $32 billion in assets betting against the subprime mortgage market in 2007.