A September sell-off in gold has turned a bad year for billionaire investor John Paulson into an even worse one.
For much of 2011, Mr. Paulson's largest hedge funds suffered, but his other funds didn't do as badly, thanks to bets on gold and other investments. That changed last month, when the value of almost every fund operated by Paulson & Co. fell sharply.
The declines come at a delicate time for Mr. Paulson, who gained prominence by cashing in on a bet against the U.S. housing market and has a net worth recently estimated at $15.5 billion by Forbes magazine. His hedge funds have shrunk in value after losses, people familiar with the situation say, and some investors face a month-end deadline to ask for their money back.
A Paulson & Co. spokesman declined to comment.
Mr. Paulson saw his fund dedicated to gold investments lose 16.4% in September, according to investors. That is worse than the 11% fall for gold prices. The Paulson gold fund now sports a gain of just over 1% in 2011, through September, compared with a 16% year-to-date gain in gold—a difference likely attributable to the fund's investment in gold-mining companies, whose shares haven't kept pace with gold's rise.
Mr. Paulson's Recovery fund, which wagers on investments deemed likely to do well as the U.S. economy improves, lost more than 14% in September and is down 31% in 2011, investors familiar with the figures say. Paulson also posted losses last month in the merger-focused fund, they say.
Mr. Paulson's largest funds, already in decline, saw mounting losses in September.
The firm's Paulson Advantage fund dropped 12.1%, leaving it down more than 32% this year. The Paulson Advantage Plus, which applies a layer of borrowed money to the firm's investments, tumbled 19.4% last month. That fund is down nearly 47% on the year, according to investors.
The gold-denominated versions of these funds, which had been up for most of the year, now are down about 20%.
The Advantage funds, the two largest in the Paulson stable, attracted a number of pension funds and institutional investors in recent years. Earlier this year, Paulson & Co. managed about $38 billion.
But after losses and redemptions, that figure now is $30 billion, according to people close to the matter.
Mr. Paulson and his executives control about half the firm's assets, a person familiar with the situation recently said. The 56-year-old Mr. Paulson gained prominence in 2007 and 2008, when his firm scored $20 billion in profits by betting against subprime mortgages and financial shares.
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