By Svea Herbst-Bayliss and Katya Wachtel
BOSTON, July 8 Hedge fund manager John Paulson's
gold fund has lost 65 percent of its worth so far this year
after the portfolio declined 23 percent last month, two people
familiar with the fund said on Monday.
Gold had been one of the billionaire investor's winning bets
a few years ago, but not this year. His investments in gold and
gold miners have suffered double digit losses for the past three
In June, gold tumbled 12 percent in the wake of fears the
Federal Reserve might taper its economic stimulus by cutting
monthly bond purchases. It is unclear how a 12 percent drop in
the price of the precious metal translated into a 23 percent
fall in the fund in June, and whether it is the result of the
bet having been leveraged up through borrowing and the use of
A spokesman for Paulson declined to comment.
With roughly $300 million in assets, the gold fund is the
smallest portfolio in his New York-based firm's lineup with less
than 2 percent of its assets and it invests mostly Paulson's
personal money, the people familiar with the fund said.
The fund's assets have fallen from roughly $700 million at
the end of the first quarter, according to those people.
They did not want to be identified because the information
The gold fund, which at one point managed almost $1 billion,
rose 35 percent in 2010 and contributed to Paulson's estimated
$5 billion payday that year.
As the heavy losses made for outsized headlines in recent
months, Paulson decided a few weeks ago to report the gold data
only to the gold fund investors, not investors in his bigger and
better performing funds. In April, Paulson garnered unwanted
attention when the gold fund lost 27 percent as the price of the
metal plunged 17 per cent over two weeks.
"Paulson's impact on the gold market is dramatic. In
particular his size alone, on the way in or way out," said John
Brynjolfsson, managing director of global macro hedge fund
Armored Wolf LLC. "But one needs to look beyond his size alone
because his positions are relatively widely publicized, and
representative of how others are thinking, so thereby their
impact gets magnified."
The gold fund is one of a handful of funds that make up
Paulson's New York-based hedge fund, which at its peak in 2011
managed about $38 billion. The firm now oversees about $19
billion in investor money.
Most of Paulson's bigger funds are in the black this year,
but the gold investments have weighed down returns of the
Advantage Funds, which lost 3.06 percent last month, shrinking
the year's gains to 1.17 percent.
Paulson & Co's largest holding by market value at the end of
the first quarter was the SPDR Gold ETF, with 21.8 million
shares, according to a regulatory filing. The firm also had
large stakes in gold mining companies through March, those
Paulson launched his gold fund in 2010, requiring outside
investors to commit $10 million each. He hired gold industry
experts Victor Flores, HSBC's former senior gold mining analyst,
and John Reade, a former senior metals strategist at UBS. The
fund is now called the PFR Gold Fund, in a nod to their last
Paulson's investments in gold are one reason he rose to
prominence on Wall Street.
After earning billions betting against the housing market
before the financial crisis, Paulson made roughly $5 billion in
2010 thanks to prescient bets on the economic recovery and gold.
Paulson is not the only brand-name manager hit by the gold
rout. David Einhorn's Greenlight Capital Management's offshore
gold fund fell 11.8 percent in June, bringing year-to-date
losses in the fund to 20 percent, Reuters has reported.