John Paulson and his god-like status

June 11, 2011

By Matthew Goldstein

By most objective measures, hedge fund magnate John Paulson isn’t having a particularly good year.

His Paulson Advantage Plus fund lost nearly 6 percent in May. His Paulson & Co. fund empire is believed to have absorbed a $300 million paper loss when shares of Sino-Forest got hammered in the wake of a critical report from a noted short-seller, who claims the company has overstated the value of its lumber holdings. And the bullish bet he’s made on a rebound in the housing market appears to be several years too early.

Then again, this is John Paulson–the mastermind of the mega subprime housing bet, which bolted him to fame and riches and certified his rock star status in the $2 trillion hedge fund industry. Today, his New York firm controls about $37 billion in assets and seems to keep taking in new investor money every day.

So even though his $9 billion Paulson Advantage Plus is in the red this year–other Paulson funds are doing quite well. For instance, Paulson’s Enhanced fund is up 11.5 percent for the year.

The big question is:  Will Paulson’s reputation in the industry will be enough to overcome the mixed the performance of his fund’s at the half-way mark?

Lesser-known managers with this kind of mixed performance might expect to be hit with some redemption notices as June comes to an end. But the feeling of many in the hedge fund industry is that is unlikely in the case of Paulson.

In fact, one well-respected institutional money manager told me that Paulson continues to retain his “god-like status” despite some recent bumps in the road.

I guess even God is entitled to have an off day or two.

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The guy swings for the cheap seats… when you swing like that and miss, you end up striking out! Not that I have tens of millions dollars, but I wouldn’t put a dime in his fund. I know it’s not sexy, but I’d say in aggregate that no fund guys or arbs have done better than Berkshire – slow and steady wins the race but it doesn’t get management fees

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