Paulson Funds getting killed

Paulson Advantage Plus is almost down 50% this year. In the rest of the HF world, a 25% loss usually triggers a blowup. As I write this BAC is 8 cents away from the $4 range.

Here's a copy of his latest newsletter. Thoughts?

Courtesy of Zerohedge

Paul Son

 

After 2008 he just got flooded with assets and launched too many funds. Honestly, the investor relations/marketing team will just pitch one of the funds that is performing well. They will say "oh this fund is down 50% but check out these funds that are up xx%"... such a game.

It's ridiculous to be down 50% but when you have so many funds and use leverage then these "anomalies" happen.

 
mb666:
After 2008 he just got flooded with assets and launched too many funds. Honestly, the investor relations/marketing team will just pitch one of the funds that is performing well. They will say "oh this fund is down 50% but check out these funds that are up xx%"... such a game.

It's ridiculous to be down 50% but when you have so many funds and use leverage then these "anomalies" happen.

Just because you put a word in quotes doesn't make it applicable.

 

^ yeah. JP just shadowed KB's trade in 2007. at least he had enough sense to subscribe to the right newsletters. apparently, that was the limit of his sense.

i have an RNG that can generate as much alpha as he. maybe i can charge 1.9 and 19 for it.

 
GoodBread:
Hmm, Paulson is still way ahead of KB in terms of cold hard cash. Hayman's been around for barely 5 years and Paulson had the rocks to put his subprime bet on in size Bass can only dream of. Paulson's performance this year is downright awful but Kyle Bass hardly has a long enough record to be a good comparison particularly when you take into account how small his AUM is.

Hmm not sure why you seem to never side with KB as he has been dead on right since Hayman's inception. Also, not sure what the point in comparing AUM size as KB is like 15 years younger than Paulson. So they both got subprime right (Although Paulson had a bit of help from his boys at Goldman vis a vis Abacus), but immediately after, KB points to the issues in PIIGS, starts buying CDS a year before everyone else, positions himself in Europe and Japan. Compare that to what Paulson did...yeahh. Take off your blinders dude.

 

JP bet heavy on a "recovery" with a huge weighting in the financials which tells me that his macro sense is no better than what you'd find on CNBC. and even as a stockpicker, he managed to take a bath on sinoforest. without GS helping him set up his three card monte table, he doesn't impress much.

 

And as we all know, European sovereign CDS are sure to trigger right? Aum is completely relevant to the discussion if we're talking money management and not simply being right. I'm simply loathe to call Bass one of the best in the game when he's only been playing it for 5 years with a relatively small pool of capital. He may be more "right" than Paulson, but it is too early to call him a better investor.

 
GoodBread:
And as we all know, European sovereign CDS are sure to trigger right? Aum is completely relevant to the discussion if we're talking money management and not simply being right. I'm simply loathe to call Bass one of the best in the game when he's only been playing it for 5 years with a relatively small pool of capital. He may be more "right" than Paulson, but it is too early to call him a better investor.

I agree with you on this. Kyle Bass is obviously super bright, but his track record is still too short to crown him as "one of the best." Having said that, Paulson was a mediocre merger arb guy before making his big subprime bet with a lot of help from his right-hand man, Paolo Pellegrini (who actually did most of the research). And he was right on gold and financials, but as a poster above said, the latter was pretty obvious to anyone who was following what the obama administration and the fed were signalling back in late 2008 and early 2009.

In my opinion, the best hedge fund managers right now are klarman, einhorn, dalio, tepper, simons, and maybe a few others.

 
Brady4MVP:
In my opinion, the best hedge fund managers right now are klarman, einhorn, dalio, tepper, simons, and maybe a few others.

I have a huge man-crush on Einhorn and I love the way he does proprietary research. The level of digging they do on channel checks is incredible and something I would love to get to be a part of. On top if it he's a legitimately nice guy-the one time I met him I had literally nothing in the world to offer him and he was very friendly and took the time to chat. To me that's the best measure of someone's character.

There have been many great comebacks throughout history. Jesus was dead but then came back as an all-powerful God-Zombie.
 
GoodBread:
And as we all know, European sovereign CDS are sure to trigger right? Aum is completely relevant to the discussion if we're talking money management and not simply being right. I'm simply loathe to call Bass one of the best in the game when he's only been playing it for 5 years with a relatively small pool of capital. He may be more "right" than Paulson, but it is too early to call him a better investor.

I'm not saying his portfolio is entirely CDS, in fact he has said about 85% of his total portfolio is net long. Would you really rather have your money with Paulson right now over Bass?

 
JeffSkilling:
I'm not saying his portfolio is entirely CDS, in fact he has said about 85% of his total portfolio is net long. Would you really rather have your money with Paulson right now over Bass?
Obviously not but hindsight is 20/20. I've never felt completely comfortable with Paulson's uber-bullishness, particularly coming into this year, but I wouldn't have pegged him as likely to drop 50%. I think Kyle Bass is an excellent analyst but his track record is too short to evaluate how he manages risk. His nickel play seems to me the perfect example of ideas getting way ahead of an actual smart trade.
 
Best Response
ivoteforthatguy:
his gold fund is up 1% while gold is up 20% on the year. must have bundled them in with some short european CDS.

Gold mining stocks behave in absurd ways relative to gold. My first FT gig after undergrad was as a TA at a small HF that did stat arb. The math guys confirmed the historical correlation from the technical side and the financial analysts confirmed how individual companies were hedged against gold. In great confidence we put on convergence trades (short gold and then long Canadian, American, Australian, South African gold-miners) and we still managed to get our faces ripped off.

I feel like gold is impossible to master because you'll never know what central banks are really doing.

 
mb666:
ivoteforthatguy:
his gold fund is up 1% while gold is up 20% on the year. must have bundled them in with some short european CDS.

Gold mining stocks behave in absurd ways relative to gold. My first FT gig after undergrad was as a TA at a small HF that did stat arb. The math guys confirmed the historical correlation from the technical side and the financial analysts confirmed how individual companies were hedged against gold. In great confidence we put on convergence trades (short gold and then long Canadian, American, Australian, South African gold-miners) and we still managed to get our faces ripped off.

I feel like gold is impossible to master because you'll never know what central banks are really doing.

Yup. My desk does intraday equity stat arb, and earlier this year we were consistently losing money on GLD vs mining stocks like BHP, ABX, NEM, GG, etc. Gold was rallying while the miners were very weak. Then in early August the relationship converged and both gold and the stocks were showing strength. We are now making money almost every day on those pairs, as well as of course miners vs miners. From a fundamental standpoint, I think investors are realizing that if gold continues going up, the miners would have to follow suit because the high gold prices will make up for the operational costs to excavate gold. Also, there's probably going to be a lot of M&A in the upcoming year or so as the larger firms will try to make acquisitions in order to expand their mine portfolios.

 

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