BOSTON (TheStreet) -- John Paulson's hedge fund generated a record $5 billion profit last year thanks to timely bets on gold.

Paulson is still a bullion bull, but some of his peers are moving on to other sectors. Gold stocks and exchange trased funds represent 2.2% of the average hedge fund long portfolio, down from 2.9% in the second quarter of 2010, according to Goldman Sachs' ( GS) fourth-quarter Hedge Fund Trend Monitor, which dissects 699 hedge funds with $808 billion of long stock-specific and ETF equity assets. Excluding gold-related ETFs, gold stocks accounted for 1.5% of the average single-stock long portfolio, down from 1.8% in the quarter ended June 30.

Hedge funds are worried over the prospects of rising inflation and have devoted $23 billion to long positions in gold stocks and ETFs. About $8.6 billion of that exposure, or 38%, is in the form of the SPDR Gold Trust ETF, according to estimates from Goldman analysts. Newmont Mining ( NEM - Get Report) is a stock favorite.

Goldman analysts limit the hedge fund universe to funds with 10 to 200 distinct equity positions. Goldman assembled its so-called hedge fund VIP list as an easy way for investors to "follow the smart money" based on the 13-F filings. That basket of 50 stocks, which now includes three companies with exposure to gold as of Dec. 31, outperformed the S&P 500 in 2009 (40% to 27%) and 2010 (19% to 15%). The VIP list has a return of 6.3% so far this year as of Feb. 18, outpacing the 5.8% increase on the S&P 500 over the same period.

Most bets on gold didn't pay off during the first month of the year, as the SPDR Gold Trust fell more than 6%. Since then, gold prices have been on a straight line upward, and the ETF has tagged along. Last week, gold rallied 2.3% to a high of $1,418 an ounce.

In total, hedge funds ended the fourth quarter with an aggregate of $13 billion in common stock long holdings and $10 billion in ETFs. On the following pages, TheStreet highlights the largest gold-related common stock and ETF holdings and looks at which fund managers were making big purchases.

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Newmont Mining ( NEM - Get Report)

Company Profile: Newmont Mining is a gold exploration company. It also produces copper, mainly through its Batu Hijau operation in Indonesia.

Number of Funds With Stock as Top 10 Holding: 15 as of Dec. 31

Major Hedge Fund Investors: Despite being the most popular gold-related common stock for hedge funds, Newmont has been a disappointment for investors this year. After falling 2% during the fourth quarter, Newmont shares have tumbled 11% this year. The largest drop came last Thursday, when Newmont shares plunged more than 7% after the company lowered its estimated gold output for the year.

Institutional ownership accounts for 86% of Newmont's outstanding shares, but only 3.6% of that is comprised of hedge funds. Among the largest owners of Newmont Mining shares are Aletheia Research & Management, which owns 3.7 million shares worth $204 million as of Dec. 31. Renaissance Technologies is the next biggest hedge fund holder of Newmont with 1.6 million shares worth $90 million as of the end of the fourth quarter. Other well known funds that own Newmont shares are Steven Cohen's SAC Capital and George Soros.


Barrick Gold ( ABX)

Company Profile: Barrick Gold is engaged in the production and sale of gold, as well as related activities such as exploration and mine development.

Number of Funds With Stock as Top 10 Holding: 14 as of Dec. 31

Major Hedge Fund Investors: Barrick Gold has also been a losing pick for investors over the past two months, falling 3% so far this year. However, with the increase in gold over the past month on unrest in the Middle East, Barrick Gold shares have climbed more than 8% in February, rewarding those who didn't sell after January's 11% slide.

As with Newmont Mining, institutions own most of Barrick Gold's outstanding shares, accounting for 73%. Of those institutional owners, hedge fund managers account for only 3%. And again, Aletheia Research & Management is the largest hedge fund owner with 3.4 million shares worth nearly $176 million as of Dec. 31. Mayo Investment Advisors and Touradji Capital Management each own 1.9 million shares worth roughly $98 million at the end of the fourth quarter.

Among other big name hedge fund managers, Paulson & Co., Renaissance Technologies, SAC Capital, and Soros Fund Management have small stakes in Barrick Gold.

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Freeport-McMoRan ( FCX - Get Report)

Company Profile: Freeport-McMoRan is an international mining company. It mines for copper, gold and molybdenum.

Number of Funds With Stock as Top 10 Holding: 14 as of Dec. 31

Major Hedge Fund Investors: Like other gold-related stocks, Freeport-McMoRan is down to start the year. Shares are down 13% over the past two months, even as gold prices have soared to new records. The share-price decline appears to have been painful for Oakmont, a fund that owned nearly 2.4 million shares of Freeport-McMoRan as of Dec. 31. That stake carried a value of $123 million at the end of the fourth quarter.

Few other well-known fund managers owned shares of the mining company, although SAC Capital, Renaissance Technologies and D. E. Shaw Investment Management reported stakes in Freeport-McMoRan.


SPDR Gold Trust ( GLD - Get Report)

Fund Profile: The SPDR Gold Trust seeks to achieve the performance of gold bullion, less the expenses of the fund.

Number of Hedge Fund Investors: 121 as of Dec. 31

Major Hedge Fund Investors: Goldman Sachs analysts estimate the current long ownership is $8.6 billion, compared to $2.2 billion on the short side. That $8.6 billion represents 38% of hedge funds' aggregate exposure to gold, making the SPDR Gold Trust the most notable holding for hedge funds in terms of gold.

Given his reported $5 billion in profit last year that came thanks to investments in gold, it's no surprise to find John Paulson's name at the top of the ownership list for the SPDR Gold Trust. Paulson & Co. owns more than 31 million shares of the fund, worth roughly $4.3 billion as of Dec. 31. Soros Fund Management has the second largest ownership of the GLD with 4.7 million shares worth $644 million.

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Market Vectors ETF Gold Miners ( GDX - Get Report)

Fund Profile: The Market Vectors ETF Gold Miners seeks to match as closely as possible the price and yield performance of the AMEX Gold Miners Index.

Number of Hedge Fund Investors: 60 as of Dec. 31

Major Hedge Fund Investors: Goldman Sachs analysts estimate the current long ownership is $1.1 billion, compared to $976 million on the short side. Blue Ridge Capital is the top hedge fund owner with nearly 5 million shares of the fund, which had a value of $288 million as of Dec. 31. David Einhorn's GreenLight Capital was second on the ownership list with 3.5 million shares worth $205 million as of Dec. 31.


iShares Gold Trust ( IAU - Get Report)

ETF Profile: The iShares Gold Trust seeks to reflect the price of gold owned by the trust, less expenses and liabilities.

Number of Hedge Fund Investors: 9 as of Dec. 31

Major Hedge Fund Investors: Goldman Sachs analysts estimate the current long ownership is $116 million, compared to $35 million on the short side. Despite the small ownership among hedge funds, the iShares Gold Trust has actually performed better than the SPDR Gold Trust and the Market Vectors ETF Gold Miners on a percentage basis in 2011, falling only 0.8% over the first two months of the year.

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-- Written by Robert Holmes in Boston.

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