|| John Paulson at the U.S. Open in September 2012 (Photo: Bloomberg)|
With his flagship fund down double digits for a second consecutive year and his preferred presidential candidate, Mitt Romney, dropping in the polls, hedge fund manager John Paulson has turned his attention to a new foe: the U.S. Securities and Exchange Commission.
The winner of what some called “The Greatest Trade Ever” against the subprime mortgage market let loose last night at a private gathering on exactly how little he thinks of the information his $19.5 billion firm is providing to regulators.
“I couldn’t even read the whole application,” he said to guffaws from several hundred young Jewish professionals gathered sipping on spirits and kosher wine at event space Chelsea Pearl in downtown Manhattan to hear his advice on how to make it in finance. "I did review part of the application, about 40 pages [out of 500], and the information we provided doesn’t make any sense to me. How could it possibly make sense to the SEC?"
"It’s a complete waste of time," he added. "They don’t know what they wanted, they just asked for everything in every possible way."
As part of the Dodd-Frank Act, signed into law by President Barack Obama in 2010, more hedge fund firms have been required to register publicly with the SEC. They must also provide more information, including “Form PF,” a private disclosure on their holdings, which the government hopes will give regulators more information on how to prevent systemic risk.
Color Paulson unimpressed.
"I don’t believe the Dodd-Frank law is a positive piece of legislation," he said dryly, understating his distaste. "I ordered the bill; there are 2,000 pages. I couldn’t read the table of contents. I don’t know anyone who has read it."
"I think it has retarded the recovery…it’s complete gobbledygook," Paulson added.
Forbes reported this week that Paulson’s net worth had dropped $4 billion in the past year (from $15 billion to $11 billion), but he showed little signs of stress. Easily among the most tanned people at the event organized by nonprofit Young Jewish Professionals network, he waltzed in casually five minutes late—interrupting a berekah prayer from a member of Chabad, the Orthodox Jewish movement—and later rolled his eyes when asked if he was tired of reading his name in the press.
Dressed conservatively in a dark suit and blue tie, at one point he flatly refused to answer a query about whether hedge funds had reputational issues to overcome in the public eye.
“I love hedge funds. I have 100% of my money in hedge funds and I’ve done great doing that,” he said. All of that money is in his eponymous firm, spokesman Armel Leslie said Friday.
Paulson answered questions alongside Ken Brody, co-founder of $6.85 billion Taconic Capital Advisors. Both men said the next big bubble to burst would be the 30-year U.S. Treasury note, echoing the advice last week of Jeffrey Gundlach, head of $30 billion DoubleLine Capital ($1.5 billion of which is in hedge funds).
“If inflation occurs, which is a reasonable bet, you’re in really bad shape,” Brody said of people holding 30-year Treasuries. At Paulson & Co., traders are buying up seven-year calls on interest rates rather than shorting the bond directly, which would be too expensive in the short-term, Paulson said in response to an audience question.
After the panel discussion ended, Paulson stuck around for about an hour to collect business cards and adulation from young attendees unconcerned with the performance of his funds in recent years (see full data here). He talked easily, smiling throughout. Loud music, however, began to crowd out his words. “Can you hear anything?” asked one fresh-faced young man to another as they attempted to push into the throng of dozens surrounding Paulson.
“No,” the other answered with a grin, and pushed a little harder into the scrum.