John Paulson eyes strong 2012
When will John Paulson return to his high-water mark in his top two funds? That’s a fair question in the wake of a disastrous year for the head fund honcho, who seemed unable to lose until this year.
His top two funds, his Advantage fund and the leveraged version, the Advantage Plus fund, were down roughly 36 percent and 51 percent in 2011. Several of his other funds were down as well. So how long until his funds get back to their high water mark, which would once again allow Paulson to take performance fees? It’s mostly likely going to be a long slog.
Bloomberg notes that Ken Griffin of Citadel was in a similar position when his flagship Kensington and Wellington funds were down in the 50 percent neighborhood in 2008, requiring gains of well over 100 percent to get back to the high water mark. It took more than three years, but Griffin achieved that milestone just recently. Both funds were up more than 20 percent in 2011.
There’s no way of knowing how long it will take Paulson to get back to even, or even if he’ll make it back. The danger is that he presses too hard and ends up taking massive losses. This is new territory for the hedge fund manager who at one point seemed to have the Midas touch. Nothing is guaranteed with his two funds.
With that said, he’s off to great start in 2012, according to Deal Journal. His Advantage fund is up about 4 percent through mid-January, outpacing the S&P 500. He has a long way to go, however. Happy trails.