John Paulson, the billionaire hedge-fund manager coming off record losses in 2011, is a more aggressive risk-taker than his peers, Spencer Boggess, Bank of America Corp.’s director of hedge-fund investments, told clients invested with Paulson.
Boggess made the comments Tuesday while introducing Paulson on a conference call, according to a person on the call who asked not to be identified because the information is private.
Paulson spoke to clients of Bank of America’s wealth-management unit less than a week after Citigroup Inc.’s private bank told clients it would pull about $410 million from Paulson’s firm. Paulson & Co. has posted an 18 percent loss in the first seven months of the year from its Advantage Plus fund, one of its largest, after losing 51 percent in 2011, according to a monthly update.
Armel Leslie, a spokesman for New York-based Paulson & Co., which manages $19.5 billion, declined to comment on the call. The hedge fund has regularly scheduled calls with wealth-management clients, according to another person with knowledge of the situation.
Citigroup Inc.’s private bank is redeeming from the Advantage Fund, Advantage Plus Fund, Merger and Recovery Funds. Bank of America has no plans to pull its money from Paulson’s firm and has confidence in the manager and his team, two people familiar with the matter said.
Gold stocks contributed to 80 percent of second-quarter losses in Paulson’s Advantage funds, Paulson said, according to the person on the call. Paulson, 56, said that he didn’t hedge, or protect against, investments in gold miners, the person said.
Anglogold Ashanti Ltd., Paulson’s second-largest U.S. holding as of June 30, has slumped 25 percent this year through Tuesday. The firm’s stake, which includes American depositary receipts and convertible securities, were valued at $1.3 billion at the end of the second quarter, according to a regulatory filing.
Paulson’s Advantage and gold funds have trailed his peers in 2011 and this year. Hedge funds have returned an average 1.9 percent in the first seven months of the year after losing 4.4 percent in 2011, according to data compiled by Bloomberg.
Paulson said his Gold Fund was up 10 percent in August through last week, according to the person. The fund, which can buy derivatives and other gold-related investments, had declined 23 percent this year through July.
Other holdings include Gold Fields Ltd., NovaGold Resources Inc. and Barrick Gold Corp. Investors need to believe and subscribe to the view that gold miners will eventually rise in order to stay invested in the Advantage funds, Boggess said, according to the person.
Paulson became a billionaire in 2007 by betting against U.S. mortgages. Boggess said that Paulson’s success in that credit trade has led to him taking a broader approach to investing, the person said. Paulson started his hedge fund in 1994 focusing on merger arbitrage investing.
Paulson told clients that he believes the volatility of his hedge funds should be less than last year after the firm reduced its net exposure. Paulson said net exposure in the Advantage funds is 20 percent, the person on the call said. On a July 23 conference call, the measure was 11 percent. Net exposure is calculated by subtracting the percentage of a hedge fund’s short positions, or bets on falling securities, from its long holdings, wagers on rising stocks and bonds.
Paulson, who owns stocks such as MGM Resorts International, said he is positive on gaming, the person said.
Paulson reiterated he has no plans to stop managing money for clients and that employee capital accounts for half of the firm’s assets, the person said. He added that two financial-industry analysts had left the firm and that turnover remains low, the person said.
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