John Paulson continues to struggle this year. The gold bug’s Paulson Advantage Plus fund lost 4.42 percent in the first two weeks of March alone, through last Friday. As a result, the Event Driven hedge fund was down 1.76 percent for the year through March 11, according to an investor.
The S&P 500 was still up around 3.7 percent for the year through last Friday.
Keep in mind that these figures were before the S&P fell more than 3.6 percent the first three days of this week alone, before rebounding on Thursday. It is not known how Paulson has performed this week as news of a leak at Japan’s nuclear plants spooked investors as well as non-investors. A spokesman for the $36 billion hedge fund firm declined comment.
Of course, Advantage Plus is not comparable to the S&P 500. However this is the most widely followed benchmark. In any case, Advantage Plus was up 2.25 percent in February and up 2.79 percent through the first two months.
Two-week, or even 2 ½-month performance figures are somewhat meaningless given that most managers take a much longer time horizon. And given Paulson’s track record since 2007, it is certainly unrealistic to draw any big conclusions from this year’s performance thus far.
But, it is interesting to observe the ups and downs through different market environments and to see how managers maneuver through them. In fact, in his year-end letter to investors, Paulson predicted all of his funds would outperform the broader market.
“We have spent the last year-and-a-half making restructuring investments in high quality assets at deeply distressed prices to maximize gains in an economic recovery,” he told investors. He said his firm invested over $20 billion in more than 40 different transactions. “Now that these companies have repaired their capital structures, their equity offers substantial upside appreciation relative to downside risk as we move toward economic normalization,” Paulson added. “This is the part of the cycle where we want to have long event exposure and do not want to be under-invested,” underlining the last five words for emphasis.
