Recovery hopes painful for hedge fund legend Paulson
John Paulson, the hedge fund manager who made billions betting on a collapse in US house prices, has lost out heavily by backing a booming economic recovery which has not materialised.
John Paulson, the hedge fund manager who made billions betting on a collapse in US house prices, has lost out heavily by backing a booming economic recovery which has not materialised.
10:27PM BST 08 Oct 2011
5 CommentsWagers that the US economy and housing market would bounce back strongly have helped leave one of his flagship funds almost 50pc down for the year so far, which will fuel talk that he has lost his "magic touch".
Paulson & Co, his New York-based hedge fund with $30bn (£19bn) under management, has informed clients its Advantage Plus fund dropped almost 20pc in September, leaving it off 46.73pc for the year, sources told Reuters.
In comparison, the average hedge fund lost 2.81pc last month leaving it down 4.74pc for the year, according to data from Hedge Fund Research.
Paulson, who reports the performance of his funds to investors on a monthly basis, will make a conference call to clients on Tuesday to explain his career's biggest loss.
"I don't think I need to listen to his excuses, it would be like rubbing salt in the wounds," one said.
Paulson's famous bet on a US housing crash helped him generate a personal fortune that the Forbes Rich List puts at $15.5bn (£10bn).
But after well-placed bets on a downturn, his optimism about the US and the wider economic recovery has proved expensive. He invested heavily in America's banking sector, where share prices have slumped in recent months.
Earlier this year he suffered heavy losses over a stake in Sino-Forest, a Chinese timber company, when fraud allegations caused its share price to collapse.
Some suggest Paulson's problem is partly one of size.
Industry watchers say large hedge funds can be unwieldy to manage, with one study looking at thousands of funds finding younger, more nimble funds offered better returns.