John Paulson and his fund Paulson & Co became famous for bets against subprime mortgages. More recently, Paulson & Co gained notoriety for its Advantage Plus fund falling 52.5% last year. While other funds offered by the firm fared better in 2011, even the best performing of the bunch – the Paulson Partners Fund – lost 10%. The primary issue the losses was not necessarily picking the wrong stocks, but rather a matter of poorly timed bets and some over-correction.
Luckily, it looks like 2012 may be a turnaround year for Paulson.
According to the Financial Times, Paulson “made large gains betting on mergers and acquisitions in the first quarter of 2012, but also saw losses on gold miners, in a mixed performance for his hedge funds as he attempts to recover from the struggles of last year.” The Financial Times writes that Paulson & Co’s Credit opportunities fund was up 5% at the end of the first quarter while its Advantage Plus fund (the one that had the largest losses last year) is down 2%. Paulson’s Advantage fund, which uses the same strategy as the Advantage Plus fund but without leverage, is down 1%. His dedicated gold fund is down 6.3%. The Paulson Partners fund, which was the firm’s best performing fund last year, is up 6.6%, while the version of the Partners fund that uses leverage, the Paulson Enhanced fund, is up 13.3%. The gold share class of that fund has done even better, coming in at roughly 15% for the first quarter 2012. Paulson’s Recovery fund is up 9.3% this year.
Given that the market returned almost 11% during the same period, and the average hedge fund is up by just 3.3%, it all seems to be coming out well – especially Paulson’s top picks. Considering just Paulson’s long picks in large cap stocks, Paulson returned 14.6% in the first quarter 2012 – not too shabby.
If Paulson continues at this rate, his staff will surely be collecting bonuses this year – a perk that Paulson is personally funding so long as Paulson & Co’s performance numbers stay in the black.