John Paulson Funds Said to Fall in July as Stocks SlumpedKelly Bit
John Paulson, whose namesake hedge-fund firm oversees $22.8 billion, posted losses in his main strategies last month as stocks fell and concern grew that credit markets will deteriorate.
The firm’s Paulson Partners, which bets on companies involved in takeovers, fell 1.3 percent, pulled down by positions in health care and telecommunications sectors, according to a person familiar with the matter. That pared yearly gains to 5.1 percent. Its Credit Opportunities fund declined 1.4 percent on losses in convertible bonds and post-reorganization equities, cutting gains in 2014 to 7.5 percent, said the person, who asked not to be identified because the information is private.
The Standard & Poor’s 500 Index tumbled 2.9 percent in the last five trading days of July as companies from Amazon.com Inc. to LVMH Moet Hennessy Louis Vuitton SA missed earnings estimates and geopolitical tensions increased. Stocks have also been weighed down by concerns that the improving economy may force the Federal Reserve to raise interest rates sooner than expected.
August is already proving challenging to hedge funds that seek to profit from takeovers. Investors have been hit hard in the past week after more than $20 billion was erased from the market value of Time Warner Inc., Sprint Corp., T-Mobile US Inc. and Walgreen Co. the day after two proposed mergers unraveled and the tax treatment of a third was reassessed.
Paulson & Co. held Sprint and T-Mobile shares, according to first-quarter filings, which dropped 19 percent and 8.4 percent respectively after a deal to merge collapsed.
Cobalt International Energy Inc., in which Paulson & Co. held a 10 percent stake according to a July 18 filing, slumped 11 percent yesterday after it reported a government corruption investigation into its Angola operations.
Last month’s losses mean Paulson’s event-driven Advantage funds and Recovery fund are down for the year. The Advantage Plus fund, a levered strategy that bets on companies going through spinoffs, restructurings or bankruptcies, plunged 5.3 percent in July and 3 percent this year, the person said.
The unlevered Advantage fund decreased 4.4 percent last month and 4.1 percent this year. The Paulson Recovery fund slumped 4.9 percent in July. after losses in the insurance and banking sectors, and 0.6 percent in 2014, the person said.
Armel Leslie, a spokesman for New York-based Paulson & Co. with WalekPeppercomm, declined to comment on the returns.