Billionaire hedge-fund manager John Paulson, whose $32 billion firm has been betting on an economic recovery by 2012, has pared bullish bets across his funds, according to a person briefed on the investments.
Billionaire hedge-fund manager John Paulson, whose $32 billion firm has been betting on an economic recovery by 2012, has pared bullish bets across his funds, according to a person briefed on the investments.
Paulson's $3 billion Recovery Fund, a bet on his view that the global economies will rebound quickly, reduced net investments in securities that are poised to gain in value with a recovery to 107 percent of assets from 140 percent, said the person, citing a letter Paulson's firm sent to clients. Paulson also cut bullish bets in his largest funds after they declined this year, the person said, asking not to be identified because the information is private.
Stocks worldwide have dropped more than 7 percent since mid-April amid concern the economic recovery may stall. U.S. growth slowed to a 2.4 percent annual pace in the second quarter, from 3.7 percent in the previous three months, as a scarcity of jobs eroded consumer spending.
Paulson, 54, said he believes the global recovery remains intact, and that over the next two years, he expects to make money in the stocks of companies going through bankruptcies, restructurings and reorganizations, according to the person.
Armel Leslie, a spokesman for Paulson's firm, declined to comment.
Main Funds Decline
Contents of the letter were previously reported by the Financial Times.
Paulson's Advantage Fund, which invests in corporate events such as bankruptcies and mergers, was up about 1 percent in July and is down 4.8 percent for the year, according to the person. A leveraged version of that fund has tumbled 7.2 percent year to date. Together, the two funds account for almost two-thirds of assets.
Paulson reduced the so-called net long exposure on his Advantage funds to 67 percent from 72 percent, and dropped it to 50 percent from 58 percent on his merger fund, the person said. Net exposure is calculated by taking bullish bets, including borrowed money, and subtracting bearish wagers.
The Recovery Fund jumped 6.5 percent in July and is up 9 percent for the year, the person said. Paulson's Gold Fund, which he started at the beginning of the year, fell 5.9 percent in the month and is up 5.7 percent through July. Gold fell 5.3 percent in the month.
