Paulson Falls Further In May As Timber Co. Bounces Back

Jun 6 2011 | 3:09pm ET

Paulson & Co. early-year losses grew last month as the $37 billion firm's flagship posted losses of almost 6%.

The $9 billion Advantage Plus Fund dropped 5.93% in May, leaving it down 7.54% on the year, Reuters reports. The fund opened the year with big losses in January, but managed to erase them in February. Since then, the fund has lost that momentum, posting more modest losses in succeeding months.

The less-levered version of the fund, Paulson Advantage, lost 4.06% on the month and is down 5.26% on the year, and Paulson's dedicated Gold fund lost 6.39%, but remains up 0.79% on the year.

June does not look like it will be any kinder to Paulson, which opened the month losing hundreds of millions of dollars on its investment in Sino-Canadian timber company Sino-Forest Corp. But Sino-Forest has continued to battle allegations of fraud made by hedge fund Muddy Waters, issuing a second defense today.

Sino-Forest, of which Paulson is the largest shareholder, posted documents that it claims support its disclosed holdings on timber land in China's Yunnan Province, leading to a big rally in its shares, which dropped 71% on Thursday and Friday. Shares are still trading at less than half their value from before the Muddy Waters research was released.

"The company believes Muddy Waters' report to be inaccurate, spurious and defamatory," Sino-Forest said, adding that it was "considering its legal remedies."

For all of Paulson's troubles this year and this month, some of its other funds have enjoyed some success—or less failure. The gold-denominated version of Advantage Plus is down only 1.3% on the year, while his Enhanced Fund is up 11.5% through May, when it lost 0.02%. Paulson Partners gained 0.08% in May and is up 6.64% on the year. Its Credit Fund lost 0.05% on the month (up 7.94% year-to-date) and its Recovery Fund lost 0.69% (up 5.03% YTD).

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