Paulson's golden investors have to commit $10 mln

* Gold fund to require a one-year lockup

* Paulson bets that gold prices will keep rising

By Svea Herbst-Bayliss

BOSTON, Nov 20 (Reuters) - Investors tempted to put money
into star hedge fund manager John Paulson's new gold portfolio
will have to commit at least $10 million and leave the money
locked up for at least one year, according to a prospectus.

In return, Paulson & Co, one of the world's biggest and
most successful hedge fund firms, says it can deliver returns
that top gold prices, at a time analysts are betting that
rising demand will make the metal even pricier.

Since founding his New York-based firm in 1994, Paulson has
concentrated mostly on merger deals and the credit market. A
bet that housing prices could fall on a national level famously
earned him roughly $3 billion in 2007.

Now, Paulson is making a concentrated bet on miners and
other bullion-related investments because central banks are
buying gold and he expects prices to keep rising as demand
outpaces supply.

Gold prices reached an all-time high of $1152.85 an ounce
this week.

Paulson has hired two gold industry experts: Victor Flores,
HSBC's former senior gold mining analyst, and John Reade, a
former senior metals strategist at UBS. Reade had originally
planned to join Credit Suisse.

Paulson introduced his plans to some existing investors
earlier this week. Other potential clients are getting a look
at the details in a private prospectus obtained by Reuters.

While Paulson is best known for his bet on the credit
market, he has included gold stocks in his funds for several
years and currently has at least 10 percent of the firm's
roughly $30 billion invested in this sector.

Paulson's Advantage Plus fund has gained 18.62 percent this
year, topping the Standard & Poor's 500 14.72 percent gain, in
part because of out-sized gains in certain gold stocks.

The fund holds AngloGold Ashanti (ANGJ.J), which has
outperformed the rise in gold prices by 30 percent this year,
and Centamin Egypt CNT.AX, which has gained 118 percent since
Paulson began buying it at $1.26 in 2007.

Potential investors in the new fund, which is set to launch
in January, will pay Paulson a 1.5 percent management fee and a
20 percent incentive fee. Analysts termed those rates
reasonable considering Paulson's track record and the fact that
some other prominent fund managers command performance fees of
30 to 50 percent.

Investors will be able to get their money back twice a year
after having given the fund firm 60 days' notice.

The minimum investment is considered high at a time when
investors are still smarting from losses of about 19 percent in
2008 -- a slump that prompted pension funds, endowments and
wealthy individuals to pull billions out of the $1.5 trillion
industry.

Gold has long been popular as a hedge against inflation,
which some economists fear is on the verge of rising sharply
given extremely low interest rates set by the U.S. Federal
Reserve and other central banks.

Paulson's prospectus quotes William Poole, the former
president of the St. Louis Fed, as saying "We are very
vulnerable to an inflation explosion."

While Paulson's portfolios have long been winners, some
potential investors expressed concern that the portfolio could
be volatile and fall fast if gold prices retreat.
(Reporting by Svea Herbst-Bayliss, editing by Matthew Lewis)