By Joseph A. Giannone and Agnieszka Flak

NEW YORK/JOHANNESBURG (Reuters) - Billionaire hedge fund manager John Paulson's big stake in AngloGold Ashanti (ANGJ.J) is a strand of his heavy exposure to gold and not designed to gain from the slim chance of a merger bid.

Before making billions of profits shorting mortgages and banks in 2007 and 2008, Paulson & Co bought and shorted stocks involved in mergers and other corporate events.

Yet mining giant AngloGold is out of bounds to all but its largest rivals as a takeover candidate, industry observers say, and Paulson's 12 percent stake in the group can hardly be a bet its shares will rise on the back of a bid.

"I doubt very much that this is because of possible merger and acquisitions (M&A) activity," said Stephen Roelofse, Cape Town-based fund manager at Metropolitan Asset Managers.

Paulson has been building up a large exposure to gold this year, seemingly part as a hedge against inflation fueled by governments trying to avert recession.

His investments are keenly watched after his credit opportunities fund surged six-fold in 2007 and soared again in 2008 thanks to timely bets on the falling value of mortgages, banks and other financial services firms.

Paulson declined to comment for this article.

LARGEST SHAREHOLDER

The billionaire earned an estimated $2.5 billion from his funds last year and dived into AngloGold in March, buying an 11.3 percent stake from Anglo American Plc (AAL.L) for $1.28 billion. Becoming the miner's No. 2 shareholder, he was quick to praise management and its strategy.

Earlier this month, Paulson again voiced support for AngloGold's board after regulatory filings revealed he had become the Johannesburg company's largest shareholder with a 12 percent stake.

AngloGold became Paulson's third-largest listed-stock position during the second quarter. By the end of June, the 42.8 million shares making up its 12 percent stake were worth $1.63 billion, according to a filing.

Paulson's combined gold and gold-related investments make up more than 46 percent of his firm's holdings.

They include SPDR Gold Trust, which invests in physical gold bullion, and which had become his top holding at 30 percent of his portfolio in the first quarter.

He also amassed shares in Gold Miners ETF, at nearly 7 percent of his portfolio, and mining stocks Gold Fields Ltd and a 4.4 percent stake in Toronto-based Kinross Gold (K.TO).

"This (AngloGold stake) is consistent with the gold shares he's taken. It's more of a statement of his interest in gold related equities," said Tom Burnett, research director at Wall Street Access and a long time analyst of M&A.