John Paulson, the hedge fund manager seeking to rebound from record losses in 2011, told investors his Gold Fund will outperform his other strategies over five years, according to a person with knowledge of the matter.
The billionaire, at a meeting yesterday at the Metropolitan Club in New York, said the metal is the best hedge against currency debasement as countries inject money into their economies, said the person, who attended the event and asked not to be named because the information is private. Paulson also cited gold as a hedge against the euro currency, as a breakup may occur, and an eventual increase in inflation.
The manager told clients his own money comprises 55 percent of the Gold Fund’s $1.2 billion in assets, the person said. The fund, which can buy derivatives and other gold-related securities, declined 11 percent last year after the metal slumped 14 percent in the final four months.
Europe’s sovereign-debt crisis may continue to affect bullion in the near term, Paulson, whose firm manages $23 billion, said this month in a year-end letter to investors. The metal serves as the best long-term alternative to paper currencies, he said.
“We remain excited about the outlook for the Paulson Gold Funds over the next few years,” he said in the letter. “We would argue that the potential upside in gold outweighs the potential downside.”
Armel Leslie, a spokesman for New York-based Paulson & Co., declined to comment on the meeting with investors.
Paulson & Co. is the biggest investor in the SPDR Gold Trust, the largest exchange-traded product backed by bullion, with a stake valued at about $2.9 billion, a Securities and Exchange Commission filing Feb. 14 showed. Paulson investors can choose between dollar- and gold-denominated versions for most of the firm’s funds. Paulson created the gold share class in 2009 and the Gold Fund in 2010, according to the firm’s third-quarter letter to investors.
Paulson, 56, became a billionaire in 2007 by betting against the U.S. subprime mortgage market. Last year, he lost 51 percent in one of his largest funds amid failed bets on a U.S. economic rebound.