Jin Lee/Bloomberg NewsJohn A. Paulson. The pain of 2011 has finally ended for John A. Paulson, the billionaire founder of the hedge fund Paulson & Company.
The results are not pretty.
His Advantage Plus fund lost 52.5 percent, the unleveraged Advantage fund fell 36 percent and his so-called Recovery fund, which was betting on the resurgence of the United States economy, dropped 28 percent. Mr. Paulson’s credit fund was down 18 percent, the Paulson Partners fund 10 percent and the gold fund 10.5 percent.
Wall Street has been alight with schadenfreude, as one of its most prominent and wealthy managers took it on the chin, month after month.
Mr. Paulson secured his fortune and fame in 2007, with a huge bet against the subprime mortgage market that earned him billions of dollars. In 2010, he personally made about $5 billion with his investments, an extraordinary sum in an industry known for lavish payouts.
Investors clamored to gain access to the manager. By the start of 2011, his funds had a colossal $38 billion under management.
And then it all started to go wrong. Bets on a recovery in the United States turned sour. A company in which he owned a major stake was accused of fraud, and the stock price was decimated. Even gold turned against him, after proving a saving grace earlier in the year.
Very few manager of such prominence have ended a year so poorly. Kenneth C. Griffin of Citadel, the Chicago hedge fund giant, lost nearly as much in 2008 and is only now coming close to climbing out of the hole.
To recoup the losses, Mr. Paulson will need to generate returns in the neighborhood of 120 percent in his Advantage Plus fund, a tall order in a marketplace plagued by uncertainty and low interest rates. The others funds, while not down by as much, will require similar feats of wonder to recover.
Still, there has not been the exodus from the hedge fund that is typically seen after such a troubled year. And investors have more or less stuck by Mr. Paulson. The last time they were able to reclaim their money from the fund, most chose not to. Some even added more money.