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Investors Are Fleeing John Paulson's Once Hot Hedge Fund

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Investors Are Fleeing John Paulson's Once Hot Hedge Fund

Hedge fund manager John Paulson accurately predicted the housing market collapse and positioned his investments accordingly. Years later, his once hot hedge fund is now anything but as investors are fleeing.

Paulson has been on the losing side of several notable trades over the past few years, including gold, European bonds and drug stocks. As such, assets under management at Paulson & Co. have fallen by $6 billion, Bloomberg reported.

As it stands today, Paulson's hedge fund holds around $10 billion in capital — of which $8 billion is Paulson's personal cash. By comparison, the firm's assets under management peaked in 2011 when it held $38 billion in cash, $19 billion of which was from outside clients.

Time For A Comeback?

Paulson can close his hedge fund and return the remaining $2 billion to investors which would give him flexibility to operate as a family office. But a "person familiar with his thinking" told Bloomberg this scenario is out of the question; Paulson is determined to restore his fund to the powerhouse it once was.

By Paulson's own admission, 2016 was "our most challenging year" since the firm was founded back in 1994. Of particular note, the merger-arbitrage-linked fund fell 25 percent in 2016 while a leveraged version of the strategy fell more than 49 percent. The fund had exposure to several notable decliners such as Valeant Pharmaceuticals Intl Inc (NYSE: VRX) and Teva Pharmaceutical Industries Ltd (ADR) (NYSE: TEVA).

Paulson has already opened three new funds over the past two years, Bloomberg added. So far, a long-short fund that invests in drug stocks rose 9.5 percent from January through May while a merger themed fund is up 7 percent.

"Investors are very much attracted to big brands, and Paulson is one of the bigger brands," Stan Altshuller, the chief research officer at data-analytics firm Novus Partners told Bloomberg. "He is one of the managers that can bounce back."

Related Links:

It's Official: 2016 Was A Brutal Year For Hedge Fund Managers

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Posted-In: Bloomberg drug stocks Hedge Funds John PaulsonFutures Top Stories Markets Media Best of Benzinga

 

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