Gain to Soros inner circle: Fund partners increase holdings by dollars 52m

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The Independent Online
A CHARMED circle of investors close to George Soros, the international speculator, increased their share in one of his key funds by dollars 52m ( pounds 35m) in the space of three months, according to fresh documents seen by the Independent on Sunday.

The revelation adds to mounting evidence that 'selected persons' linked to Mr Soros receive lucrative privileges unavailable to ordinary investors in his sprawling Quantum empire.

The information is included in the 1993 accounts of the newly formed Quantum Partners, which have just been released.

While full details of the increase are not yet available, previous audited accounts of funds in the Soros empire indicate that the dollars 52m is likely to have resulted in part from profits made on trading in shares of the flagship Quantum Fund.

This trading has been volatile in recent weeks, both as a result of substantial losses made by the fund and redemptions by fund shareholders.

Mr Soros hit the headlines in September 1992 when he and other currency speculators helped to trigger the collapse of sterling. He and Quantum made dollars 1bn in profits from the debacle.

As revealed in the Independent on Sunday last week, 'selected persons' connected with Mr Soros invest directly in the partnership, bypassing intermediaries and avoiding the premium others pay - an option not open to ordinary fund investors.

They also benefit from a 'reallocation' of profits made from dealing in the fund's shares, which trade at a high premium.

How much of the increase is due to this reallocation will not be known until the audited accounts are issued in May or June, but in 1992 the Quantum Fund made a profit of nearly dollars 70m from these dealings.

Preliminary accounts for two other funds in the Quantum stable operating on the partnership basis show that the interest held by Mr Soros's close associates has increased even more.

Between 31 January 1993 and the end of the year their stake in Quasar International Partners jumped from 29 per cent to 39.56 per cent - an increase of over dollars 150m

In Quantum Emerging Growth it rose from 15 per cent to 19.43 per cent, or some dollars 192m.

In the case of Quantum the interest held by 'selected persons' was only 2.5 per cent. Nevertheless, that represented almost double the proportion allotted shortly after the partnership was set up last August.

The premium on Quantum shares dropped a full two points on 4 March to 36 per cent, a level maintained last week. A dealer attributed the drop to shareholder redemptions. Earlier last month it fell to 35 per cent on the news of trading losses in the yen, but was subsequently marked up again.

On Friday dealers were busy sorting out the response to Mr Soros's latest distribution offer. Investors in Quantum and three other funds had until the end of the day to choose between cash and shares in two new funds.

They were expected to plough about dollars 1.2bn into Quantum Industrial Holdings, and up to dollars 100m into the Asian Infrastructure Development Fund, an operation sponsored by Hong Kong-based Peregrine Investment Holdings, which is hoping to raise a total of dollars 750m.

This is yet another move to reduce the size of Quantum, which stood at almost dollars 5bn at the end of 1993. But it will do little to limit the dollars 10bn extent of the overall Quantum group operation.

Quantum Industrial's investment policies reflect the deepening problems Mr Soros faces in finding new investments.

Soros sources maintain that the investment side of the operations is private, and they therefore feel under no obligation to comment.

(Photograph omitted)

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