Paulson’s Advantage Plus Declines in February, Paring 2012 Gain

John Paulson lost 1.5 percent in February in one of his largest hedge funds, according to an investor update, paring this year’s gain and setting back efforts by the New York-based manager to recoup record losses in 2011.

Paulson’s Advantage Plus Fund, which seeks to profit from corporate events such as takeovers and bankruptcies and uses leverage to amplify returns, gained 3.5 percent in the first two months of 2012, according to the update, a copy of which was obtained yesterday by Bloomberg News.

Paulson, 56, is seeking to reverse losses from an ill-timed bet on an economic recovery. The declines, including a 51 percent drop in the Advantage Plus fund in 2011, prompted the manager to reduce risk just as markets seem to stabilize. The Standard & Poor’s 500 Index gained 4.1 percent last month amid optimism that Greece would receive a second bailout and climbed 8.6 percent this year through Feb. 29.

Armel Leslie, a spokesman for Paulson & Co., which manages about $23 billion, declined to comment on the firm’s returns.

The gold share class of the Advantage Plus Fund decreased 2 percent in February and climbed 4.9 percent this year. Paulson investors can choose between dollar-and gold-denominated versions for most of the firm’s funds.

Paulson’s Gold Fund, which can buy derivatives and other gold-related investments, slumped 4.8 percent last month and climbed 8 percent this year. Paulson told investors in February that his Gold Fund will outperform his other strategies over five years.

Recovery Fund

Gold fell 1.7 percent last month, largely due to a one-day drop of as much as $100 to below $1,700 an ounce on Feb. 29 after the Federal Reserve gave no indication it will offer more monetary stimulus to bolster the U.S. economy.

The Recovery Fund, which invests in assets Paulson believes will benefit from a long-term economic rebound, such as financial services, insurance, hotels and real estate companies, climbed 3.2 percent last month and 6.5 percent this year. Its gold shares gained 0.6 percent in February and 10 percent in 2012.

The Paulson Partners Enhanced Fund, which invests in the shares of merging companies, jumped 6.5 percent in February and 11 percent this year. Its gold share class gained 2.8 percent last month and 14 percent in the first two months of the year. Paulson’s Credit Opportunities Fund returned 0.2 percent last month and 3.8 percent in 2012. Its gold shares fell 1.1 percent in February and increased 7.7 percent this year.

Paulson’s Advantage Fund, which employs a similar strategy to Advantage Plus, decreased 0.8 percent in February and climbed 3 percent this year. Its gold share class slumped 2.3 percent last month and gained 6.8 percent in 2012.

To contact the reporter on this story: Kelly Bit in New York at kbit@bloomberg.net

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

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