Wednesday, 23 July 2014
Last updated 31 min ago
Apr 22 2010 | 12:51pm ET
Paulson & Co. founder John Paulson continued his efforts to reassure clients about his firm’s role in a derivatives transaction that has landed Goldman Sachs in hot water, even as he jetted off to London for an investor conference.
In a second conference call with investors since the Securities and Exchange Commission filed fraud charges against Goldman Sachs over a collateralized debt obligation it structured and marketed for Paulson, the hedge fund billionaire again said his firm had done nothing wrong.
“We have not made any misrepresentations,” Paulson said. “To protect our investors, we bought credit protection on securities we thought were mispriced.”
Paulson himself landed in London this morning—after some uncertainty due to the restrictions on European airspace following the volcanic eruption in Iceland—to speak to pension fund managers and trustees. Paulson has long planned to attend the conference, set up by consultancy Cardano, though it was unclear if he would address the Goldman situation.
In the conference call yesterday, Paulson reiterated that investors are not fleeing the fund. Managing director James Wong said that redemption requests received so far are lower than normal, although clients have until next Friday to file.
Yesterday’s chat follows a similar conference call on Monday and a letter to investors on Tuesday.
Paulson said the SEC case, which does not accuse him or the hedge fund of any wrongdoing, would not “affect our investment strategy.” And he added that, having “really made an attempt to reach out and explain our situations,” that, “we’re just going to be focused on our portfolio going forward.”
According to the SEC, Paulson played a key role in picking the mortgage-backed securities that went into the ABACUS-2007-AC1 CDO, which Paulson then shorted, earning $1 billion. The regulator alleges that Goldman misled investors, including ACA Management, which actually selected the securities that went into the CDO, about Paulson’s role and its bet against the portfolio.
But Paulson said its role had been blown out of proportion.
“The only thing we knew in this transaction was that we bought protection from Goldman Sachs,” he said.
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…