Hedge fund titan John A. Paulson has grabbed the attention of world by being on the NYTimes) cover page of Bloomberg Businessweek, but with caveats. The cover page has a post-it note Plastered over his face with the words “The Big Loser.”
John Paulson’s flagship fund lost 52% for 2011.
For the current year, the fund has lost 10%. Even gold, which was a hot performer, is not delivering returns to compensate.
In a rare interview with Harvard Business School that was published online earlier this month, (it has since been taken down) value investor Seth Klarman spoke at length about his investment process, philosophy and the changes value investors have had to overcome during the past decade. Klarman’s hedge fund, the Boston-based Baupost has one of Read More
The founder and manager of Paulson & Co, made his fortune and fame by betting against the subprime mortgage market. He told investors in January, that last year’s big losses, including a 50 percent decline in his popular Advantage Plus fund, were an “aberration.”
In his defense Paulson told Businessweek, “We had built up a great track record—in 18 years, we only had two down years, one of which was last year That drawdown was disappointing, but you can’t think about the past. You have to think about the future.”
Paulson has admitted to his investors that in 2011 he was overly optimistic about the speed of the U.S. recovery and underestimated the magnitude of Europe’s debt crisis. He has called last year’s performance “unacceptable” and said he was committed to delivering “superior investment performance” in the future.
Remarking about the investors who left the fund, like the New Mexico Public Employees Retirement Association, Paulson told Businessweek “If you’re going to come in and then leave, come in and leave, I don’t think you’ll reap the benefits of investing with us Investors that do the best, and have done the best, are those that stay and compound at above-average rates over the long term.”
The abysmal performance has reduced the firms asset to $22 billion from $38 billion early last year.
Adding to his woes, two of his top lieutenants – Robert Lacoursiere, a former partner, and banking analyst James Fotheringham – left in March to start their own fund, Petrarca Capital.
Mevi, chief investment officer of New Mexico, who pulled its $40 million investment in the first quarter after staying with the fund through last year’s growing losses, told that the Paulson’s fund had become too large and could not easily get in and out of positions.
Even Morgan Stanley (NYSE:MS) ,which once raked in big fees selling access to Paulson’s funds over the years has now put Paulson on a “watch list”, instructing clients to avoid putting new money with him.
Optimistic about Paulson’s fund, is Charles Krusen, chief executive officer of Krusen Capital Management, said “Going into the second half of 2012, he is well-positioned.”
Answering to his retirement rumors, Paulson told Businessweek “I’m still relatively young, you know, being 56,” he says. “If you look at Soros—he’s 81, I think. Buffett, he’s 81. … How old is Icahn?”