March 10, 2008 / 3:35 PM / 12 years ago

Paulson & Co hedge funds surge on trading gains

NEW YORK, March 10 (Reuters) - Paulson & Co, the hedge fund group that quadrupled in size last year on the back of the credit crisis, is surging again this year in all three of its major strategies, the firm said.

The firm’s performance, disclosed to investors in a letter on Friday, stands out amid lackluster and loss-making results elsewhere in the hedge fund sector, where slumping stock markets and volatility in the credit markets caused a number of firms to falter or even collapse.

Paulson, which manages about $30 billion and counts former Federal Reserve chairman Alan Greenspan as an adviser, posted net returns of over 8 percent in the first two months of 2008 in its credit strategies, the letter said.

Paulson, which is managed by investor John Paulson, posted net gains of between 5.5 percent and 10 percent for the period in its event-driven strategies, a broad trading strategy that bets on the likelihood of corporate changes.

Another major strategy, merger arbitrage, is also up between 4.3 percent and 9 percent, after deducting fees, the letter stated. Merger arbitrage, Paulson’s flagship strategy, bets on the prospects for completion of corporate transactions, such as mergers and acquisitions.

Over the last year, Paulson reached prominence in the investment world for its stratospheric gains, largely by betting on declines in bonds backed by residential mortgages.

The firm’s assets swelled from around $7 billion a year ago to around $30 billion today, both on investment gains and asset growth from investors.

A firm spokesman declined to comment. (Reporting by Dane Hamilton; Editing by Brian Moss)

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