Tags: John Paulson | Gold | Fund | Metal

John Paulson Gold Fund Said to Lose 27% Last Month as Metal Declined

Tuesday, 07 May 2013 12:50 PM

 

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Hedge fund billionaire John Paulson is one of the biggest losers in this year's gold rout, with his gold fund of under $1 billion losing 27 percent in April alone, according to performance figures provided by a person familiar with the fund.

The jarring one-month decline in the Paulson gold fund brings the year-to-date loss for the fund to about 47 percent, the source said.

The April selloff in gold was particularly fierce and came as a surprise to many hedge fund managers who were long either gold bullion or the SPDR Gold Trust, the most popular gold exchange-traded fund.

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Hedge fund manager David Einhorn said on a conference call on Tuesday, "We were somewhat surprised by the swift decline in the price of gold in April."

The majority of the money invested in the Paulson gold fund is believed to be the billionaire' s own. Paulson rose to fame for making $15 billion betting against the housing market on the eve of the financial crisis in 2007. But since then he has struggled to duplicate that success, and his portfolio of funds has struggled in recent years.

Paulson disclosed the gold fund loss to investors on Monday along with results for his other funds, the source said.

Over a two week stretch in April, the price of gold plunged 17 percent, from $1,603 per ounce to a low of $1,321 on April 16, before starting to rebound. As of Tuesday, the metal was trading near $1,446.

Regulatory filings show that at the end of last year Paulson & Co Inc, the firm that manages Paulson's hedge funds, was the largest holder of the SPDR Gold ETF, with 21.8 million shares. Paulson has not yet disclosed its latest position in the gold ETF. Since the beginning of the year, the gold ETF has fallen about 14 percent.

Paulson's hedge funds also are large investors in shares of gold mining companies, which similarly have sold off this year.

Until this year, gold had been a solid investment. In the wake of the financial crisis, a number of hedge funds began buying gold as a hedge against inflation. But inflation has yet to materialize, despite the Federal Reserve's aggressive purchases of Treasuries and mortgage bonds to stoke the economy.

Paulson's more widely held Advantage fund declined 0.8 percent in April, largely because of its gold positions, the source said, and is up 2.5 percent for the year through April.

The Advantage fund and a leveraged version of it were once two of Paulson's most popular funds but now have less than $5 billion in assets.

The average hedge fund is up a little over 3 percent this year.

Assets at Paulson's firm have dropped to $18 billion, down from $38 billion in early 2011, due to redemptions and poor performance.

Two other funds managed by Paulson are performing well this year. His credit-focused fund is up 11.9 percent, and the Paulson Recovery fund is up 21.8 percent.

Editor's Note: Save, shop and invest like an insider! Our experts lead the way each month in The Franklin Prosperity Report. Click here to learn more.

© 2014 Thomson/Reuters. All rights reserved.

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