Paulson Hedge Fund Said to Lose 14% in August

John Paulson, the billionaire who is betting on an economic recovery by the end of 2012, has lost about 14 percent this month on a merger arbitrage hedge fund, according to an investor.

The Paulson Partners Enhanced fund declined 11 percent this year through Aug. 19, said the investor, who asked not to be named because the information is private. The fund had been up 2.9 percent this year through Aug. 4.

Paulson’s merger-fund losses add to the declines his New York-based firm, Paulson & Co., has suffered on other strategies. His largest hedge fund, Paulson Advantage Plus, dropped 22 percent this month through Aug. 19, bringing its 2011 loss to 39 percent, the investor said.

Paulson, 55, has scaled back bullish bets after losses this year. His firm last quarter cut its stake in Bank of America Corp. stock by half and trimmed its Citigroup Inc. holding as financial shares slumped, and also reduced its investment in Hewlett-Packard Co. (HPQ), one of its other large holdings. The computer maker’s stock has fallen 15 percent since Aug. 18, when the company agreed to buy software maker Autonomy Corp. for $10.3 billion.

Armel Leslie, a spokesman for Paulson, which manages about $35 billion, declined to comment on the losses that were reported earlier today by the Wall Street Journal.

To contact the reporters on this story: Katherine Burton in New York at kburton@bloomberg.net; Saijel Kishan in New York at skishan@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net