Paulson funds start to recover in July - source

BOSTON Aug 4 (Reuters) - Hedge fund manager John Paulson said this week that he is less certain about the U.S. economic outlook, and has pared positions slightly as a result, according to an investor in Paulson & Co funds.

Still, Paulson told clients that his flagship Advantage funds were back on the upswing in July after reportedly sustaining losses for the first half of 2010.

As of July 23, Paulson & Co's levered Advantage Plus fund was up 3.1 percent from the end of June, the investor said. Earlier reports said the fund lost about 8.8 percent in the first of 2010.

The Advantage fund's dollar share class was up about 2 percent as of July 23 compared with the end of June, after falling by 5.9 percent in the first half of 2010. Final results for July are still being tallied.

A spokesman for the funds declined to comment.

Clients received a letter from $31 billion Paulson & Co this week, outlining some of the fund manager's current views.

In May, Paulson told investors on a conference call that "I think we have the basis for a strong economic recovery," and was especially bullish on housing prices.

In making his forecasts Paulson tends to speak about an economic cycle instead of looking at developments on a month to month basis. (Reporting by Svea Herbst, writing by Ros Krasny, editing by Leslie Gevirtz)