Hedge Funds on Gold

In a post dealing primarily with Bill Ackman’s hedge fund, gold as a holding or non-holding is discussed. Ackman holds none, but his position does not appear to be at odds with others.

One last paragraph we want to focus on is Ackman’s brief mention of the risk to one’s purchasing power. Due to quantitative easing and money printing by the Fed, he acknowledges that there are concerns about future buying power of the dollar. Ackman highlights that many investors have turned to gold to hedge these risks, but not Pershing Square. Instead, they have decided to fight this risk by owning “high quality businesses that have pricing power due to market position and/or business model, and/or that earn their profits globally.”

This is interesting to see his stance on the matter as we can’t really recall him addressing it before. You’ll remember that David Einhorn and Greenlight Capital made a large gold investment and now are storing physical gold. Additionally, John Paulson’s hedge fund Paulson & Co bought gold via GLD (the exchange traded fund) to hedge their share class denominated in gold. It’s interesting to see each fund manager’s individualistic approach and hedging vehicle of choice. However, the main thing to take away from all of this is the fact that they see inflation as a potential threat in the future and are trying to mitigate this risk accordingly.

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