Paulson's 2016 Loss Mounts With Advantage Fund Down 18.5%

  • Advantage fell 2.8% during September, Partners dropped 4.5%
  • Hedge-fund billionaire isn’t seeing rebound achieved by peers

John Paulson is suffering deepening losses in two of his hedge funds, a sign that the positive turnaround in performance seen by several managers this year may be out of reach for the billionaire.

Paulson & Co.’s Advantage fund, which wagers on companies going through corporate events including spinoffs and bankruptcies, fell 2.8 percent last month, bringing this year’s losses to 18.5 percent, according to people with knowledge of the matter. His merger fund, Paulson Partners, slid 4.5 percent in September, extending losses for 2016 to 22.3 percent, said the people, who declined to be named because the information is private.

Paulson’s losses are in stark contrast to his hedge-fund peers, who’ve averaged a 2.2 percent gain in merger-arbitrage strategies and a 6.8 percent return across event-driven strategies in the first nine months of 2016, according to Hedge Fund Research Inc. His is among firms bearing the brunt of withdrawals as pension plans and other large investors that flocked to name-brand managers during the industry’s heyday in the last decade retreat after years of lackluster returns.

A spokesman for New York-based Paulson declined to comment on the performance.

The Advantage fund is on the precipice of its third straight year of losses. Paulson has struggled with uneven returns since his wager against U.S. housing in 2007 spurred a $15 billion windfall. Last year, he pledged his personal investments in four of his hedge funds as additional collateral for his firm’s borrowings, after investment losses and client defections cut assets from a peak of $38 billion in 2011.

Three out of Paulson’s four biggest positions in U.S. equities as of the second quarter lost money last month, according to data compiled by Bloomberg. As of June 30, he held a 4 percent stake in drugmaker Mylan NV, which slumped 10 percent in September.

Paulson wasn’t alone among the marquee hedge fund firms to record negative returns. Passport Capital’s Global Strategy fund lost 13.6 percent this year through September, and Brevan Howard Asset Management’s main hedge fund is down 3.4 percent. Meanwhile, famous managers that managed to climb out of the red in their main funds include Coatue Management, Citadel, Millennium Management, and Och-Ziff Capital Management Group LLC.

— With assistance by Katherine Burton

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