By Svea Herbst-Bayliss
BOSTON, June 28 (Reuters) – Billionaire trader John Paulson
has told his wealthy investors that he has learned from his
mistakes of 2011, which produced enormous losses for his closely
watched hedge fund.
The founder and manager of Paulson Co, who made his
fortune and fame by betting against the subprime mortgage
market, went so far as to tell investors in January that last
year’s big losses, including a 50 percent decline in his popular
Advantage Plus fund, were an “aberration.”
But as the months tick on, many investors are still waiting
to see the dramatic turnaround Paulson has vowed to deliver.
Halfway through 2012, Advantage Plus is down again, losing
10 percent through May. Another big portfolio that bets on gold
– once a bright spot for Paulson – was also in the red. In both
cases, he blamed losses in gold stocks for the declines.
This has taken a huge bite out of the firm’s assets, which
have fallen to $22 billion from $38 billion early last year,
according to investors. Redemptions were substantial, but poor
performance accounted for the bulk of the drop, they said.
While Paulson still has loyal clients, some U.S. public
pension funds and Wall Street firms that are invested with him
have expressed their growing unease.
There are few signs of a quick comeback for the 56-year-old
trader, who fumbled in 2012 by missing out on a big
first-quarter rally in U.S. financial stocks. Last year, a
Paulson fund got pounded by being too bullish on banks. He cut
some of those losing positions – most notably by exiting Bank of
America Corp in late 2011, just before the rebound.
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