It’s not easy being a billionaire hedge fund manager. Just ask famous hedge fund guru John Paulson, who had to admit to investors last week that his hedge funds were seriously hammered last month when global financial markets sold off.
According to a source with knowledge of the matter, Paulson & Co’s flagship Paulson Partners fund was down by dropped 4.2% in August, slicing its 2015 gain to just 6.52%. The well-known Advantage Fund has lost 4.9% for the month and is off 3.6% for the year. The worst performer is the Special Situations Fund, which saw its portfolio lose 8.35% of its value in August, and now stands at an extremely disappointing -11.6% for 2015.
Seth Klarman Tells His Investors: Central Banks Are Treating Investors Like “Foolish Children”
"Surreal doesn't even begin to describe this moment," Seth Klarman noted in his second-quarter letter to the Baupost Group investors. Commenting on the market developments over the past six months, the value investor stated that events, which would typically occur over an extended time frame, had been compressed into just a few months. He noted Read More
Analysts point out that the losses in Paulson & Co’s funds in August are in the same ball park as those in other large hedge funds, but the losses are especially painful for the once-$20 billion firm, as until a few weeks ago, it was in position for a nice rebound from a difficult 2014.
More on John Paulson hedge funds
Paulson did not go into into detail with specific explanations for the losses, but large investments in healthcare stocks, including Shire and Valeant among others, dragged the hedge funds down.
Worries about Chinese currency devaluation and a hard landing in China, uncertainty regarding the anticipated Fed interest rate increase as well as collapsing commodity prices all played a role in the recent stock market rout, which led to losses for other hedge fund managers Nelson Peltz, David Einhorn and William Ackman.
Paulson typically makes a specific “bet” and then rides it out, for example, when he bet against the overheated housing market in 2007 and then again shorting gold when it got above $1800 in 2009. He had done well this year riding the pharma sector merger trend.
Over the last few years, Paulson has been making investments in Puerto Rico. He is totally rebuilding the historic San Juan Beach Hotel and also has stakes in several other tourism-related developments on the island.
Paulson & Co already operates a number of funds, and at least two more are scheduled to launch by the end of the year, but analysts point out that Bank of America and UBS ended access to the Paulson Advantage fund to high net worth clients earlier this summer given concerns about recent poor performance.