Monday, June 6, 2011

John Paulson's Funds Have Rough May

Hedge fund manager John Paulson made his name in the subprime crisis, famously working with Goldman Sachs to create mortgage derivatives he could bet against.  The outsized profits of that era led to an avalanche of money seeking his counsel and now his hedge fund is amongst the largest in the world.  After a very rough May, 2011 has not been so kind for Paulson's funds, the FT reports.  And June isn't look so sweet either as a  potential "fake Chinese company" listed in Canada, is a half billion stake for his funds.

That said Mr. Paulson himself is doing fine :) [Jan 28, 2011: WSJ - John Paulson Bests $4B Gains of 2007, with $5B Year in 2010] [Mar 29, 2010: Are John Paulson's Hedge Funds Now Too Big to Outperform]

  • Paulson & Co, the world’s third-largest hedge fund, saw the value of its flagship fund drop close to 6 percent in May, echoing losses across the industry.   The loss tops negative returns in the first quarter at the $37 billion New York-based money manager, famed for the spectacular returns gained by shorting the US mortgage market in 2007, and will again raise questions over its portfolio’s volatility.
  • John Paulson, Paulson & Co’s founder, has maintained his bullish view on the US economy and equity markets, even though many of his peers have recently begun to lower their market exposure levels.
  • May’s loss means that in the year to date, the $9 billion Paulson & Co Advantage Plus fund is down 7.6 percent. The average hedge fund lost 1.39 percent over the month according to preliminary data from Hedge Fund Research, with “event-driven” strategies such as that operated by Paulson & Co’s main fund down on average 0.62 percent.
  • May was also a painful month for Mr Paulson’s other big investment call: gold   The Paulson & Co Gold fund dropped 6.39 percent in May, erasing much of its 8.5 percent April gain. The fund is up 0.9 percent in the year. Paulson & Co is the world’s largest non-sovereign gold investor.  
  • Performance was better for the firm’s other funds. Its Credit fund was down 0.05 percent for May, while the Recovery fund, which is geared to the prospects of the US economy, dropped 0.69 percent. Paulson & Co declined to comment.
  • In the firm’s most recent correspondence with investors Mr Paulson said difficulties for US banks had been a particular drag on his portfolios but that he remained optimistic. The US stock market could rally as much as 40 percent from its first quarter level this year, he said. 
  • June is also shaping up to be a difficult month. Paulson & Co is the largest investor in Sino Forest, the Canadian-listed forestry group that has been accused by short seller Carson Block of fraud, charges that the company disputes.  The collapse in Sino Forest’s share price on Friday handed a $460 million paper loss to Paulson & Co.
  • The Advantage Plus fund returned 17 percent in 2010. It returned 21.5 percent in 2009, 37.6 percent in 2008 and 158.5 percent in 2007. 

[Nov 18, 2008: Paulson Buying Mortgage Backed Securities]
[Jan 31, 2009: Dealbook - John Paulson's Year End Review]
[Feb 17, 2009: Hedge Funds Pile into Citigroup; as does Bruce Berkowitz of Fairholme Funds]
[Mar 17, 2009: John Paulson Joins David Einhorn as Gold Bug with Stake in AngloGold Ashanti (AU)]
[May 16, 2009: John Paulson Continues to Pile Into Gold]
[Jul 9, 2009: Latest Picks and Pans from John Paulson and George Soros]
[Aug 12, 2009: John Paulson Makes Bank of America 2nd Largest Holding after Gold]
[Aug 26, 2009: Citigroup Surges on John Paulson Investment]
[May 18, 2010: John Paulson's Q1 2010 Moves]

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