Paulson’s firm, Paulson & Co., was hit hard last year. His Advantage Plus fund finished the year down 52.5%, and his other funds didn’t do much better. Paulson’s unleveraged Advantage fund fell 36%, his Recovery fund dropped 28%, his credit fund was down 18%, the Paulson Partners fund was down 10%, and the gold fund lost 10.5% in 2011. As of the end of the first quarter 2012, Paulson was in a much beter position. His opportunities fund was up 5% at the end of March while his Advantage Plus fund (the one that had the largest losses last year was down 2%. Paulson’s Advantage fund, which uses the same strategy as the Advantage Plus fund but without leverage, was down 1%, while the dedicated gold fund was down 6.3%. The Paulson Partners fund, which was the firm’s best performing fund last year, was up 6.6%, while the version of the Partners fund that uses leverage, the Paulson Enhanced fund, was up 13.3%. Paulson’s Recovery fund was up 9.3%. The gold share class of that fund did even better, coming in at roughly 15% for the first quarter 2012. All in all, Paulson returned 14.6% in the first quarter 2012.
If Paulson is right about shorting European sovereign bonds and credit-default swaps on European debt, 2012 could be the sort of red letter year the hedge fund manager needs to get back on track. In fairness, Paulson does not have a reputation as a great stock picker but he has made a name for himself on macro-themed investments – be they his bets against subprime mortgages or or the $5 billion he made betting on gold in 2010. In other words, Paulson has a reputation for getting this type of bet right.
