John Paulson, hedge fund manager and owner of Paulson & Co, reported his main funds were down 1.5% in February. This comes after Paulson’s funds reported a 50% loss in 2011 which has his investors second guessing his investment style and their investments with the firm. We noted only five days ago that Paulson’s strategy for 2012 appeared confused.
Luckily for Paulson, a good January has his Paulson Advantage Plus Fund up 3.5% still. However, in order to make up for last year’s losses and February losses, Paulson’s funds would need to rack up 100% returns to get back to where he was over a year ago. Since Paulson is not at the “high water mark”, he is unable to charge the huge performance fees that hedge funds are known to charge. The only way things could get back to normal for Paulson is if his funds have a ridiculously good year and gain 100%, which is highly unlikely.
In other good news, some of his other funds have not fared as badly as the flagship fund. For instance, the Recovery Fund, the fund that bets on the US recovery, is up 6% for the year. The Paulson Partners Enhanced fund is up 11% in the first two months of the year.
John Paulson is an icon on Wall Street and many different managers and traders look up to him for his investment accomplishments such as his big 2007 bet against the subprime mortgage market. Unfortunately, this is a classic example of no one gets it right all the time. Every investor and trader will go through a slump similar to this and you will feel like you do not know the basics anymore but this is when you stay the course. Step back and reevaluate your investment strategies and see what is different. Are emotions getting in the way? Are you having difficulty analyzing the market? Is your trading system out of date? These are a few of the questions you should be asking yourself because most of the time your slump is being attributed to by one of those factors. If you are able to identify it then you can make the changes quicker to get back to your old self.
Trading and investing are a volatile game. One minute it may seem like you are never wrong and the next day you may never be right. The market is unpredictable, that is why you need to reevaluate yourself every once in awhile to make sure you are on the right path and not on the road to disaster.