Soros Fund's U.S. Stock Portfolio Falls 50% During 3rd Quarter
Bloomberg News
November 13, 1998, 6:27 p.m. ET
Soros Fund's U.S. Stock Portfolio Falls 50% During 3rd Quarter
Washington, Nov. 13 (Bloomberg) -- The value of U.S. stock
holdings reported by billionaire hedge fund manager George Soros
in regulatory filings fell by more than half during the third
quarter.
Soros Fund Management LP reported that its U.S. stock
portfolio was worth $3.9 billion on Sept. 30 -- less than half
the $8.0 billion value reported on June 30, according to
documents filed with the U.S. Securities and Exchange Commission.
The New York-based fund manager's SEC filing didn't explain
the decline, which could represent sales of significant stock
holdings, the effects of falling share prices, or decisions to
move parts of the portfolio from public SEC filings to a
confidential report that some money managers are permitted to
submit to the agency.
''My guess is that Soros doesn't like the stock market as
much anymore,'' said Norman Zadeh, the co-owner of Prime Advisors
Inc., a Los Angeles based company that runs hedge funds. ''The
risks are too great vis-a-vis the potential returns.''
In a quarterly filing that lists the hedge fund manager's
stock portfolio, Soros reported holding 148 stocks on Sept. 30 --
down from 247 stocks at the end of the previous quarter. Among
stocks no longer listed in the most recent filing: American
Express Co., CVS Corp., Sprint Corp., Times Mirror Co., United
Healthcare Corp. and Nike Inc.
Smaller Stakes
Soros Fund Management also reported smaller stakes in dozens
of other companies, including Pfizer Inc. The hedge fund manager
said it held 1.6 million shares of the New York-based drug
company, down from 4.6 million shares in the previous quarterly
report.
Soros, formerly the third-biggest shareholder US Airways
Group Inc., also reported holding 2.6 million fewer shares in the
Arlington, Virginia-based airline. The hedge fund group owned
703,400 US Airways shares at the end of September.
Because the filings provide only a snapshot of the fund's
holdings, there are several possible explanations for the decline
in the portfolio's reported value. While declining to give
specifics, a Soros spokesman warned against jumping to
conclusions.
''I wouldn't necessarily look at it as that we've been
selling,'' said Shawn Pattison, a spokesman for Soros Fund
Management. ''Some of them (the stocks) may have moved to a
confidential filing. Some of them could have moved if there's
outside investment advisers and we no longer view the shares'' as
those that need to be reported in the fund company's quarterly
Form 13F filing with the SEC.
Soros Fund Management is one of the largest hedge fund
operators, with some $16 billion in assets under management.
While Soros is chairman of the management company, Stanley
Druckenmiller has handled day-to-day investment decisions since
1989.
Prices Hit Bottom
Druckenmiller said in an August interview with CNBC cable
network that he saw the U.S. stock market as the world's most
attractive, and saw ''compelling'' evidence that prices had hit
bottom. From a record 9367.8 on July 20, the Dow Jones Industrial
Average dropped more than 20 percent by Sept. 1. Since then,
however, the benchmark average has risen about 20 percent. Today,
the Dow gained 89.85 to 8919.59.
Money managers who control $100 million or more of equities
must file a Form 13F with the SEC after the end of each quarter
that discloses the contents of their stock portfolios. However,
to keep investment strategies secret, money managers also can
apply for permission to report some of their holdings to the SEC
in a separate, confidential form that may not be made available
to the public for as much as year.
Some stocks in the portfolio may simply be worth less than
they were on June 30. Another possible explanation is
redemptions. As markets tumbled during August and September, some
funds may have had to sell securities to repay loans or raise
money to pay shareholders who redeemed their investments.
Fund Losses
Soros Fund Management's flagship Quantum Fund disclosed that
it lost 9.7 percent of net assets in August, or about $1 billion.
About half of the loss occurred on Aug. 31, the day the Dow Jones
Industrial Average plunged 512 points.
While some hedge funds only let investors withdraw money on
a limited basis, such as at the end of each month, the Quantum
group of investment funds run by Soros permits daily redemptions.
Zadeh at Prime Advisors, however, expressed doubt that Soros fund
investors were defecting in droves.
''I do believe most of their investors are very loyal to
Soros,'' said Zadeh. ''They would want a guy with a long-term
sterling track record of making money in up markets and down
markets.''
Hedge funds are private investment pools in which the
manager is usually paid a performance fee and invests alongside
his or her clients. The funds invest by making bets on currencies
and interest rates as well as stocks and bonds.
''Theoretically, if it truly has a hedged aspect to it, a
fund is going to have less volatility and do better in down
markets,'' said John Broadhurst, an attorney whose firm
represents more than 200 money managers. ''The problem is that
there are things called hedge funds that can be 100 percent long
(invested in stocks) and can be highly leveraged.''
--Siobhan Hughes and Miles Weiss in Washington (202) 624-1879
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