Friday, 25 July 2014
Last updated 2 hours ago
May 11 2010 | 12:03pm ET
Paulson & Co. will close its largest hedge funds to new investments this summer, it told clients in a conference call yesterday.
The New York-based firm, which manages $35 billion, said it would restrict inflows into its Advantage funds, which manage about $20 billion. Paulson said it will only take in new money to replace redeemed investments, with further details to come in late June.
The moves comes amidst a fair amount of criticism of Paulson for not closing the funds to new investment as most blue-chip hedge funds do. To date, however, Paulson’s openness to new money hasn't hurt the Advantage Plus fund, it’s largest: The fund is up 6% through April, ahead of its peers if slightly trailing the broader markets.
Firm founder John Paulson rejected the criticism that his funds had grown “too big to succeed,” saying that their increased size has not hampered their ability to produce returns.
During the call, Paulson received only one question related to the Securities and Exchange Commission fraud lawsuit against Goldman Sachs, which stems from a collateralized debt obligation that the bank structured and marketed for the hedge fund. The question he did get was actually about redemption requests in the wake of the Goldman case, which the firm said were running below average. Paulson also said it expected any outflows to be offset by new money coming into its funds.
Paulson has not been accused of any wrongdoing in the Goldman case. The SEC alleges that the Wall Street giant misled investors about Paulson’s role in building the CDO and about the hedge fund’s plans to short the vehicle.
Most of the call dealt with Paulson’s economic outlook. The man who made his name betting against housing prices, earning triple-digit returns three years ago, now believes that home prices will bounce back.
“If you don't own a home today, now is the time to buy one,” Paulson said. He said home prices would rise between 3% and 5% this year and between 8% and 12% next year.
“I believe we have the basis for a strong economic recovery,” he said. “I think we will continue to grow in excess of the estimates.” The hedge fund honcho said his bet is on a V-shaped recovery, adding, “we are pretty excited by the opportunities in front of us.”
Paulson’s take on the U.S. housing market is more bullish than most, as is his position on the European debt crisis. He said that those sovereign debt issues were “manageable.”
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…