* Paulson had tried to protect against sovereign default in
* Said facts have changed in Europe
By Svea Herbst-Bayliss
BOSTON, Dec 5 Billionaire hedge fund manager
John Paulson told clients on Tuesday evening that his funds lost
money this year when bets that Europe's debt crisis would worsen
failed to pay off, two people familiar with the meeting said on
But Paulson, one of the world's biggest managers with
roughly $20 billion in assets, also sounded a slightly more
optimistic note for 2013, saying early signs point to an
improvement in the housing market.
The 56-year old manager had invited hundreds of investors to
hear him discuss his macroeconomic views and his portfolios at
Jazz at Lincoln Center in Manhattan. Bloomberg first reported
the news of the client meeting.
Earlier in 2012 Paulson had expressed concern about Europe
and tried to protect against a sovereign default.
But he acknowledged that the facts have now changed.
Europe's new central bank governor, Mario Draghi, showed a
strong commitment to the region and to the common currency which
hurt his initial thesis.
Paulson's moves have been closely watched by the investment
world ever since he earned billions in 2007 thanks to successful
bets against the housing market.
In the last months Paulson has moved the portfolio away from
Europe and is now concentrating on bets elsewhere.
The firm specializes in so-called event arbitrage and makes
money through mergers, bankruptcies, spin-offs or other similar
This year, like last year, however, some of Paulson's
strategies have made negative headlines with additional losses.
At the end of October the Advantage Plus fund was off 17 percent
after having lost 50 percent in 2011. Last year Paulson was
criticized for having been too optimistic about an economic
recovery after bets on Bank of America and Chinese
forestry company Sino Forest helped contribute to
heavy losses in the Advantage Funds.
Paulson is expected to tell investors how his funds fared in
November in the next days. He did not discuss performance at
While the Advantage funds, which make up about $6 billion in
assets, were underperforming again this year, other funds at the
New York-based Paulson & Co are faring better.
The credit funds, now the firm's largest strategy with more
than $6 billion in assets, were up for the year at the end of
At the start of the year Paulson promised investors to work
for free as he sought to improve performance.
Investors had until Oct. 31 to say if they wanted to pull
money out of the Advantage funds by year's end. A person
familiar with the portfolio said that redemptions were running
below their historical average and that conversations with large
investors around the world are likely to lead to inflows in the
Paulson has long been popular with wealthy U.S. investors,
who can get a piece of the fund through Bank of America's
Merrill Lynch unit and UBS and other bank's platforms. But the
firm is also eager to diversify its client base around the
Paulson also spoke about the firm of 120 people, which is
known in the industry for its relatively low turnover. He said a
handful of people have left but that he also hired more than a
handful of people, including at least one from Soros Fund
Management, to concentrate on energy, technology and distressed