John Paulson, Stanley Druckenmiller and George Soros are among billionaire investors who would no longer have to reveal which stocks they own under a U.S. plan to ease disclosure rules -- hardly the smaller fund managers that regulators say the overhaul is supposed to benefit.
While the legendary traders all oversee billions of dollars, the value of each of their firms’ equity holdings traded on U.S. exchanges is less than the $3.5 billion threshold that would trigger public reporting in the Securities and Exchange Commission’s proposal. They are far from alone, as other Wall Street icons below that level include Louis Bacon, David Tepper, David Einhorn and Paul Tudor Jones.
Even Ray Dalio’s Bridgewater Associates, the world’s biggest hedge fund manager with $138 billion of assets, is in striking distance of the SEC’s suggested limit because the firm holds just $5 billion of stocks, according to its most recent quarterly filing with the regulator. It would be nearly impossible for Bridgewater to get under the existing threshold of $100 million -- a level that hasn’t been changed in more than four decades.
Paul Singer’s Elliott Management has about $3.4 billion in stocks and convertible bonds, and holds options on another $2 billion in equities, according to its latest report. Depending on the market value of those options, which isn’t disclosed, Elliott might also avoid revealing its equity investments under the SEC’s proposal.
The SEC announced July 10 it was considering increasing the rule’s reporting threshold, with Chairman Jay Clayton saying the move would allow the agency to continue monitoring the “holdings of larger investment managers while reducing unnecessary burdens on smaller managers.” Warren Buffett, and giant mutual fund companies like BlackRock Inc. and Fidelity Investments, would continue reporting equity investments every three months in filings known as 13Fs under the SEC’s plan.
But that’s not true for the majority of hedge funds and family offices because few own $3.5 billion in stocks. Many fund managers have long complained about having to reveal their holdings -- stakes that are closely monitored by other investors, Wall Street analysts and the financial media -- because they believe the disclosures allow traders to steal some of their best ideas.
Leon Cooperman, who converted his hedge fund firm Omega Advisers into a family office in 2018, said he likes the SEC proposal because it would reduce his filing costs. “On the other hand, it would be nice to have over $3.5 billion in the market,” he quipped in an email.
Other fund managers either declined to comment or didn’t respond to requests for comment.
The 13F filings are more a snapshot than a true depiction of what fund managers’ have in their portfolios. That’s because traders have 45 days after a quarter ends to submit the forms to the SEC. They show holdings in stocks that trade on U.S. exchanges, as well as options and convertible debt. The filings don’t include non-U.S. traded securities or wagers against stocks, nor do they show the price at which a fund bought or sold a security.
The obligation dates back to 1975 when Congress required it to better inform the public and the SEC about what big fund managers were up to. The goal was to increase investor confidence in U.S. securities markets.