Hedge Funds

Nov. 15, 2010, 7:11 p.m. EST

Paulson & Co. trimmed B. of A., Citi stakes

Hedge-fund firm maintains huge stake in SPDR Gold Trust

By Alistair Barr, MarketWatch

SAN FRANCISCO (MarketWatch) — Paulson & Co., a large hedge-fund firm run by John Paulson, trimmed stakes in Bank of America Corp. and Citigroup Inc. during the third quarter, according to a regulatory filing late Monday.

The firm maintained its investment in the SPDR Gold Trust /quotes/comstock/13*!gld/quotes/nls/gld (GLD 133.00, +0.58, +0.44%) during the period, the filing also showed.

Paulson held 137,794,296 shares of Bank of America /quotes/comstock/13*!bac/quotes/nls/bac (BAC 12.06, -0.04, -0.33%) common stock at the end of September. That compares with 167,794,229 shares of Bank of America common stock at the end of June, according to a regulatory filing from earlier this year.

The investor held 424 million shares of Citigroup /quotes/comstock/13*!c/quotes/nls/c (C 4.30, -0.02, -0.46%) common stock at the end of September. That compares with 506.7 million shares of Citi common stock on June 30, according to the filings.

Paulson’s investments are closely watched because the firm generated huge gains betting against mortgage-related securities before a housing meltdown triggered the global financial crisis.

His firm launched a Recovery fund in the wake of the crisis to invest in financial-services firms that needed new capital; Bank of America and Citigroup were among the largest of these investments.

Paulson has also made a big bet on gold, which the firm considers a hedge against the devaluation of the U.S. dollar and other paper currencies.

Paulson owned 31.5 million shares of the SPDR Gold Trust on Sept. 30 — the same position the firm held on June 30, according to regulatory filings.

Alistair Barr is a reporter for MarketWatch in San Francisco.