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Investors Fleeing Paulson Funds

October 27, 2012 | About:


Despite a recent rebound in gold mining equities, investors are still bailing from John Paulson's hedge funds.

Paulson had a rough year in 2011 with bad stock picks like Bank of America (BAC). Unfortunately, he sold out of many of those positions and did not benefit from a rebound in shares in 2012.

According to a news article published on Yahoo Finance by CNBC's Kate Kelly, "Through Sept. 30, people familiar with the matter said, the Advantage Plus fund has fallen 15 percent, meaning that a dollar invested in it on Jan. 1, 2011, would be worth about 41 cents today. In the Advantage fund, the drop was roughly 10 percent, meaning that that dollar would be worth 57 cents today."

Kelly continued: "That fall has been equally pronounced in the firm's total assets under management. Once $38 billion, the figure has fallen to nearly half that since early 2011, and now sits at nearly $20 billion, people familiar with the matter said."

It is most likely the manner in which Paulson has lost money, that has perturbed investors. He was embarrassed when Sino Forest turned out to be an outright fraud.

Some investors have lost almost 70% of their dollar holdings in the last few years.

"In my 20-plus years, I have never seen someone go from so high to so low in such a time period," said Brad Alford in the news article; Alford runs the Atlanta investment firm Alpha Capital Management. The article reported that he had originally invested about $10 million of his high net worth clients' money in Paulson, a figure that Alford estimated is now closer to $3 million.

Nonetheless, the end of forced selling in some of Pauslon's holdings could lay the groundwork for a big rebound in 2013.

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