John Paulson is getting hammered by volatile financial markets this year. According to an article by Bloomberg published on Thursday, October 9th, the two main Paulson hedge funds were down 11% and 8%, respectively, in September.
Paulson is famous for making $15 billion in 2007 shorting the U.S. housing market, and is worth $13.8 billion, per the Bloomberg Billionaires Index. However, his performance has been less than stellar since 2008.
Since the financial crisis, Warren Buffett's Berkshire Hathaway has had significant exposure to financial stocks in its portfolio. Q1 2021 hedge fund letters, conferences and more At the end of March this year, Bank of America accounted for nearly 15% of the conglomerate's vast equity portfolio. Until very recently, Wells Fargo was also a prominent Read More
Paulson hedge fund performance
The $22 billion Advantage fund, which invests in corporate transition situations, such as spinoffs and bankruptcies, was down a disappointing 8% in September, resulting in an annual loss to date of around 13%, according to two knowledgeable Bloomberg sources. The sources noted that Paulson’s Advantage Plus fund, a leveraged version of the Advantage fund, dropped an eye-opening 11% for the month and is down 14% for the year.
Details on September fund performance
The Paulson Credit Opportunities fund slumped by 3.7% last month, hurt by a combination of defaulted securities, convertible bonds and bank debt. That brought gains this year down to just to 3.6% The Recovery fund was 5.9% in September and 6% in the first three quarters of the year.
Paulson’s merger funds, which invest in takeover situations, also had small losses, with the Paulson Partners fund down 0.2% in September, as telecommunications and energy positions detracted from gains and brought year to date results to 4.9%. The leveraged version of the strategy dropped 0.3% in September and is up 8% for the year.
The sources also pointed out that an unrestricted share class of the Advantage funds that can buy new issues had a very good month, largely due to a highly profitable investment in Alibaba Group Holding Ltd (NYSE:BABA). The Chinese e-commerce group titan undertook a record-setting initial public offering almost four weeks ago. The unrestricted shares of this class of Advantage were up an impressive 8.5% in September and 2.5% for the year, and the shares of this class of Advantage Plus skyrocketed by 14% in September and 9.6% in 2014.