Wednesday, August 10, 2011

Hedge Funds: John Paulson's Main Funds Down 21% & 31%

Wow, this almost always happens.  A fund has stunning success, takes tons of inflows, grows huge - and then has a big flop.   Even the venerable John Paulson (who to remind, was 'nobody' before 2007) is taking it in the shorts this year... down 31% year to date!  August has been a horror.

Paulson has been far more bullish on the economy the past 15-18 months than I have been, and hence seems ill prepared for this sort of market reaction.  Not that it is easy for anyone dealing with these huge asset amounts - very difficult to move a battleship.  There were questions about his ability to manage such assets a year and a half ago... [Mar 29, 2010: Are John Paulson's Hedge Funds Now Too Big to Outperform]

Via NYT Dealbook

  • The year keeps getting worse for the hedge fund titan John A. Paulson.  He began August down about 15 percent and 20 percent respectively in his flagship funds (His Advantage Plus fund uses borrowed money, which amplifies the ups and downs).
  • Now, just 10 days in, August is shaping up to be the worst month of all. The two funds have continued to bleed, with the Advantage fund now down about 21 percent on the year and the Advantage Plus down 31 percent, according to several investors in the funds.
  • Investors suspect that has also hammered Mr. Paulson’s hedge fund because his exposure to financial companies. 
  • Mr. Paulson sent a note to reassure investors last Friday about redemptions. In particular, he noted that investors in the Advantage funds had asked to pull out just 2 percent of the funds’ assets.
  • It’s unclear what Mr. Paulson’s other funds are doing this month so far, since Paulson & Company gives investors only monthly updates on his other funds.

[Jun 6, 2011: John Paulson's Funds have Rough May]
[Jun 21, 2011: John Paulson Has Potential $720M Loss in Sino Forest]
[Jul 6, 2011: Average Hedge Fund Down for the Year]

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