Hedgeweek Comment: Turmoil, what turmoil?
Pick up any financial newspaper or business section from the past few weeks and you will find it very hard to come across a positive story. So the revelation by Financial News that hedge funds run by US manager John Paulson have posted not just positive but shoot-the-lights-out performance comes as striking contrast to the usual fare of bankruptcies, liquidations, takeovers, lawsuits and losses.
According to the report, the hedge funds run by Paulson & Co have bucked a trend of steady hedge fund losses this year by making returns of as much as 19 per cent in 2008 to date. One fund that generated 589.62 per cent achieved what is thought to be the largest dollar return in a year from a single hedge fund.
Last year Paulson turned USD500m in the firm's Credit Opportunities fund into USD3.5bn by shorting the sub-prime market, a feat considered by consultants and investors as the largest dollar amount ever generated by a hedge fund in a year.
Paulson's USD9bn Advantage Plus fund is up 19.44 per cent this year, the Advantage Fund is up 13.22 per cent, the Credit Opportunities Fund up 12.46 per cent, the Enhanced Fund up 8.17 per cent and the International Fund up 5.17 per cent.
It is believed that Paulson has profited well from its short selling strategy. Last week it disclosed short positions in UK banks HBOS, Lloyds TSB, Barclays and Royal Bank of Scotland. If short selling of financial stocks is banned permanently, all eyes will be on Paulson's next investment idea.
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