Paulson Having a Very Bad Year

August 13th, 2011
in econ_news

John-Paulson Econintersect: The headline in Financial Advisor Magazine screams: "Paulson Loses 31% In Main Hedge Fund." The famed hedge fund manager, who made about $15 billion in 2007 betting against the housing market and $5 billion in 2010 betting on financial stocks could be losing as much as half of those gains so far the year. Paulson (pictured) has been betting on a strengthening economic recovery and continued with investments in the financial sector, although he has been cutting back in that sector lately, according to reports by Bloomberg.

Follow up:

The beginning of August has been devastating. From Bloomberg:

John Paulson, the billionaire who is betting on an economic recovery by the end of 2012, lost 11 percent in the first week of August in his largest hedge fund, according to a person familiar with the firm.

The decline leaves the Advantage Plus Fund, which tries to profit from corporate events such as takeovers and bankruptcies, down 31 percent since the start of the year, said the person, who asked not to be named because the fund is private.

Paulson, 55, has scaled back bullish bets after losses this year and told clients in June that he reduced his stake in Bank of America Corp., where he was the ninth-biggest holder with almost 124 million shares as of March 31. The bank’s shares have tumbled 47 percent since then. Paulson would have to return about 45 percent in the remainder of the year to break even in the Advantage Plus Fund.

Paulson had losses of about 11% in his largest fund at the end of August, 2010. But he had big gains in the fall to end the year up 17%. This year he will have a much bigger hole to climb out of.

The losses are not an impersonal thing for Paulson. According to Bloomberg, Paulson and his employees account for 36 percent of assets in the Advantage funds.

Sources: Financial Advisor Magazine and Bloomberg article in the San Francisco Chronicle


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