Paulson’s Biggest Funds Keep Losing In Nov.; Gold Fund Gains - Focus on Funds - Barrons.com

Paulson’s Biggest Funds Keep Losing In Nov.; Gold Fund Gains

By Murray Coleman
Barrons.com

Hedge fund manager John Paulson, whose prowess earned heady profits of upwards of $15 billion when markets tumbled during the financial crisis, continues to see his fortunes sink in 2011.

Sources tell the Deal Journal that Paulson & Co.’s Advantage Fund was down 3% in November, raising its losses this year to around 32%. At the same time, Paulson’s Advantage Plus Fund — which uses similar strategies but applies leverage — fell 3.6% last month. It’s reportedly off by 46% for the year. By comparison, the S&P 500 traded flat on the month.

But it wasn’t all negative for Paulson’s investors in November. His bets on gold proved beneficial as the firm’s Gold Fund rose 1.3% in the month, leaving it ahead by 11% in 2011. By comparison, the SPDR Gold ETF (GLD) entered today’s session with a return of more than 23% on the year.

Paulson has bet big on a relatively quick economic turnaround, losing so far this year on financials such as Citigroup (C), Bank of America (BAC) and China’s Sino-Forest (SNOFF), a forestry firm accused of overstating its holdings by short-seller Carson Block.

In a third-quarter letter to investors, Paulson acknowledged that his performance was “the worst in the firm’s 17-year history.” The letter also stated that “we are disappointed and apologize.”

The European sovereign-debt crisis, slowing economic growth and disagreement over the debt ceiling in the U.S. combined to pressure fund performance, Paulson explained. “As the year progressed our assumptions proved overly optimistic and net equity exposure too great,” he added.

Paulson has reportedly dramatically slashed his equities exposure in key hedge funds. The net exposure in his main hedge fund is believed to have been cut to around 30% — about half what it was just four months ago.

Paulson sold stakes in several of his lagging positions in the third-quarter. Those included Citigroup and SunTrust Banks (STI). The hedgie also reported no shares in previous holdings NYSE Euronext (NYX) and J.P. Morgan (JPM).

Paulson’s Biggest Funds Keep Losing In Nov.; Gold Fund Gains - Focus on Funds - Barrons.com