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Has John Paulson Lost His Touch?

It’s been a losing year for John Paulson, who made billions during the housing bust

John Paulson is famous for betting against subprime mortgages at a time when most Americans thought real estate was a sure thing. He made billions. Lately, his contrarian streak hasn’t served him as well. Since 2009, he’s placed bets on a U.S. recovery, and his recent results are as dismal as the economy itself. Paulson’s largest hedge fund, Advantage Plus, lost 34 percent this year through August, according to two people familiar with the firm, who asked not to be identified because the fund is private.

A good chunk of that decline came in August, when the fund fell 15 percent, these people say. Standard & Poor’s 500-stock index fell 5.7 percent in August, ending the month down 3.1 percent for the year. “John Paulson is considered one of the top hedge fund managers in the industry—a 30 percent drawdown will cause a number of investors to watch his performance very closely going forward,” says Donald A. Steinbrugge, managing partner of Agecroft Partners, a Richmond (Va.)-based firm that advises hedge funds and investors.