It was only a meteoric end to 2010 that saw Paulson & Co post positive returns for the year.
It was only a meteoric end to 2010 that saw Paulson & Co post positive returns for the year. The firm’s flagship Advantage Fund delivered 17 per cent, but as of August 2010 it was down 11 per cent. The same tough times are facing Paulson, one of the industry’s most respected hedge fund managers, in 2011: for the first half of the year the flagship fund was down 12 per cent whilst Advantage Plus had lost 18 per cent. It prompted an urgent conference call to investors last week, during which Paulson took responsibility by admitting he had been “too aggressive” and promised to do better.
One investment in particular that went awry was Chinese timber company Sino-Forest Corp. Paulson didn’t point the finger at anyone specifically but conceded that the firm needed to bolster its research team in Asia. It needs to know the region better before taking new bets reported Reuters, who quoted Paulson as saying: “We’ll have to strengthen our research capabilities there.” When Muddy Waters Research released a paper in which it questioned Sino-Forest’s overstated timberland holdings, Paulson was already reducing the size of his position but it proved too little too late, even though the firm was getting requests from other trading desks to borrow the stock. Paulson & Co’s losses ended up being around USD107million. The firm is expected to beef up its research in Asia by hiring a specialist in Hong Kong.
