Soros Fund Management doubles bet against S&P 500, turns bullish on gold

George Soros - Festival Economia 2012

Soros Fund Management, the asset management company founded by U.S. billionaire George Soros , doubled its bet against the S&P 500 stock index and turned upbeat on gold, its filing to the U.S. Securities and Exchange Commission showed on Monday.

The hedge fund said it owned a put option of 2.1 million shares on the SPDR S&P 500 exchange-traded fund (ETF), which tracks the benchmark U.S. index, in the first quarter of 2016. Put options are generally considered a bearish bet and entitles the holder to sell an asset at a particular price.

The fund has more-than doubled its bet that the index will decline: In the fourth quarter of 2015, Soros had a 1 million share put option on the ETF.

The S&P 500 index rallied sharply from the middle of February but has pared some gains this month.

This comes amid mixed signals about the health of the U.S. and global economy. U.S. economic expansion slowed to 0.5 percent annualized in the first quarter from 1.4 percent in the fourth and the much-eyed nonfarm payrolls report in April showed disappointing levels of job creation.

Economic data from China, the world's second-biggest economy, has continued to disappoint as well. Industrial production, retail sales and investment data came in below expectations over the weekend, despite official stimulus measures.

Last month, Soros warned China's debt-fueled growth bore an "eerie resemblance," to the conditions that led to the 2008 financial crisis .

Demand for gold and other precious metals are closely tied to the health of the Chinese and other Asian economies, which are big markets for bullion. As a result, Soros' increased exposure to gold in the first quarter may come as a surprise.

Gold was traditionally viewed as a "safe haven" bet in times of market uncertainty, akin to U.S. Treasurys or German Bunds, so the increased exposure could tie in with Soros' fears about the Chinese economy.

However, the positive relationship between gold prices and risk aversion has abated somewhat since the commodities slump. Spot gold prices have rallied by 20 percent since the start of the year to $1,274 per ounce, but remains below 2011 peaks above $1,800.

The fund, which is currently structured as a privately owned family office, bought 19.4 million shares in Barrick Gold, having previously dissolved its stake in the world's top gold mining company by production in the third quarter of 2015.

Soros also took out a new 1 million share stake in the first quarter in Silver Wheaton, which claims to be the world's largest precious metals streaming company.

Perhaps most notably, Soros took out a 1.1 million share-call option on the SPDR Gold Trust, the largest ETF tracking physical bullion in the world. Call options are usually viewed as a bullish bet and entities the bearer to buy an asset at a specified price.

Other top hedge funds take a different stance on gold. Paulson & Co, led by one-time gold bull John Paulson , slashed its investment in SPDR Gold Trust last quarter, its filing to the U.S. Securities and Exchanges Commission showed on Monday. Last quarter it held 4.8 million shares in the ETF, down from 5.8 million shares in the last three months of 2015.

Soros also cut its stakes in some of the world's biggest technology stocks. As the prices of these stocks are cyclical — tied to the broader economic cycle — this could also be viewed as a bet on a slowdown in the U.S. or global economy.

It cuts its class-A shares of Alphabet , the parent company of Google, to 6,637 in the first quarter from 65,570 in the fourth quarter of 2015. Plus, it roughly halved it holding of Facebook shares to 442,696 from 816,761.

It dissolved its call on Alibaba Group Holdings and added a small stake of 3,100 shares in Apple .

Warren Buffett 's Berkshire Hathaway brought 9.8 million shares in Apple last quarter, the company's regulatory filing showed on Monday.

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