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Paulson Funds Said to Fall Last Month as Advantage Drops

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Paulson Funds Said to Fall Last Month as Advantage Drops

Billionaire hedge-fund manager John Paulson posted losses in his main strategies in September as stock and corporate bond markets fell.

The $22 billion New York-based firm’s Advantage fund, which makes bets on companies undergoing corporate change, such as spinoffs and bankruptcies, slumped 8 percent last month, bringing yearly losses to 13 percent, according to two people familiar with the matter, who asked not to be identified because the information is private. The Advantage Plus fund, a leveraged version of the strategy, tumbled 11 percent in September and 14 percent for 2014, the people said.

The firm’s credit, merger and recovery funds also lost money last month as markets were rattled by concerns that global economic growth was slowing. The losses are a setback for Paulson, 58, who had staged a comeback in 2013 from wrong-way bets in prior years on the U.S. recovery, the European crisis and gold. The hedge-fund manager is best known for making $15 billion in 2007 betting against the U.S. housing market and is worth $13.8 billion, according to the Bloomberg Billionaires Index.

Armel Leslie, a spokesman for Paulson & Co., declined to comment on the returns.

Alibaba Investment

An unrestricted share class of the Advantage funds that can buy new issues bucked the rest of the funds in September mainly because of an investment in Alibaba Group Holding Ltd., one of the people said. The e-commerce group completed a record initial public offering last month. The unrestricted shares of Advantage climbed 8.5 percent in September and 2.5 percent this year and those of Advantage Plus surged 14 percent in September and 9.6 percent in 2014, said the person.

Paulson Credit Opportunities decreased 3.7 percent last month, pulled down by defaulted securities, convertible bonds and bank debt, paring gains this year to 3.6 percent, the people said. The Recovery fund lost 5.9 percent in September and 6 percent in the first nine months of the year.

The merger funds, which bet on companies involved in takeovers, posted smaller losses, with the Paulson Partners fund down 0.2 percent last month, as telecommunications and energy positions detracted from gains in health care, to pare gains to 4.9 percent this year. The leveraged version of the strategy fell 0.3 percent in September and is up 8 percent in 2014.

(Updates with Alibaba investment in fifth paragraph.)