John Paulson's Advantage Plus Fund Reportedly Down 6.9% in June
Thanks to a particularly gutsy bet against the US subprime mortgage market in 2007, John Paulson became the world's most famous hedge fund manager (and one of the richest as well).
Paulson's bet against the US subprime mortgage market has been well-documented - for a thorough re-telling of the story, I would suggest that you read "The Greatest Trade Ever" by Gregory Zuckerman.
Anyways, Paulson made himself and his investors billions upon billions of dollars when the US real estate market start to crack (and then outright implode) in 2007. Many people openly mocked Paulson and his gutsy trade, but his steadfast resolve in the face of outright skepticism ended up making him one of the most famous hedge fund managers of all time (and one of the richest).
Many people were of the opinion that Paulson wouldn't be able to continue to post significant gains after his 2007 windfall. These people were proven wrong in both 2008 and 2009, as Paulson & Co Inc. continued to rack up impressive gains, even as the hedge fund industry buckled and nearly collapsed.
Investors were seemingly stampeding out of practically every major hedge fund in the world and directly into the waiting arms of John Paulson, who had managed to continue to prosper despite the fact that equity markets were hemorrhaging throughout the world.
The result? Paulson and Co. Inc. became one of the largest hedge fund firms in the world in just a couple of years, lording over a total of $35 billion in assets under management.
Based on the sheer size of Paulson's funds, it was seemingly just a matter of time before he under-performed his counterparts.
Is 2010 going to be that year?
According to Reuters (link below), Paulson's Advantage Plus fund was reportedly down 6.9% in June. Over the first half of 2010, the fund is apparently down 8.8%.
It's not hard to see why Paulson's Advantage funds underperformed in June. Paulson is a big believer in financials, and his firm has taken some very large positions in the likes of Citigroup and Bank of America over the past year or so.
Look at how some of Paulson's biggest holdings fared in June:
C - $3.96 to $3.76
JPM - $39.58 to $36.61
BAC - $15.44 to $14.30
COF - $41.30 to $40.30
STI - $26.95 to $23.30
As mentioned, these are some of Paulson's largest holdings (his firm owned about $3 billion worth of BAC and $2 billion worth of Citigroup at the end of Q1), so it's not hard to see why Paulson slumped in June.
According to those close to the situation, John Paulson is reportedly still bullish on financials.
It will be interesting to see what happens when John Paulson does have an off year, especially as compared to his peers in the hedge fund industry. Will the investors in his fund stick around, or will they move on to another firm, certain that Paulson's luck has run dry?
Paulson's results have been ridiculously phenomenal over the past three years. However, it will be VERY interesting to see how he does over the next three, especially with the eyes of the investing world firmly transfixed on his company.
Source: Reuters.com - Paulson's Advantage Plus Fund Lost 6.9% in June
Source: Davemanuel.com - Paulson & Co. Inc Holdings As of 03/31/2010
Filed under: Hedge Fund News