Paulson Gold Fund Fails To Attract Investors

Feb 11 2010 | 10:20am ET

Despite his unsurpassed track record, investors have proven wary of John Paulson’s new gold fund.

Paulson poured a quarter-billion dollars of his own money into the new vehicle, which debuted on Jan. 1. But clients have added only $90 million of their own to it.

The fund dropped 14% in January after the precious metal’s year-long rally ended last month.

Paulson & Co. burst onto the scene in 2007, producing triple-digit returns betting against the subprime market. It’s also posted consistently positive returns over the past two years. The New York-based firm’s main hedge funds are currently big investors in gold, with about 10% of its assets invested in the precious metal and related investors.

But some doubt Paulson’s commodities-trading skills, The Wall Street Journal reports. Others think they can do just as well investing in levered exchange-traded funds, which don’t feature a three-year lockup, $10 million minimum investment or 20% performance fee.

Others just think that it is an inopportune time to jump in feet first.

“It’s purely my negative view on gold in the short run,” Christopher Zook of CAZ Investments told the Journal. “I just am waiting for hopefully a better entry point.”

Still, it is early going for the six-week-old fund. The Journal notes that Paulson had trouble attracting investors to his credit fund in 2006, a year before his bets proved tremendously profitable.


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