Paulson Defends Decision To Invest In Sino-Forest, Says Firm Lost $574M

Jun 27 2011 | 1:29pm ET

John Paulson has offered a defense of his hedge fund's disastrous investment in a Chinese timber company, while admitting that it cost his investors more than US$500 million.

The Paulson & Co. founder told investors that losses from its Sino-Forest Corp. investment totaled some C$562 million (US$574 million). The hedge fund, which dumped its stake—once 12.5%—in the company last week, suffered net realized losses of C$105 million over the life of its investment.

Sino-Forest shares, listed in Toronto, plummeted earlier this month when hedge fund Muddy Waters accused the company of overstating its timberland holdings in China's Yunnan Province. Shares took a further hit last week when the Globe & Mail newspaper backed up some of Muddy Waters' claims.

Sino-Forest has denied the allegations, but its shares have dropped by some 90% since the Muddy Waters accusations emerged.

Despite the huge losses, Paulson did not offer contrition for the investment, noting that the hedge fund "conducted considerable due diligence" before pouring millions into Sino-Forest. He said a member of the firm visited China to inspect the company's operations and intensively researched the company before investing in 2007. Paulson also lauded Sino-Forest's "outstanding financial results" and noted that it "consistently traded at a significant discount to its global forest company peers."


In Depth

Q&A: Quad Advisors’ Borish Is Looking For Real Traders, Not Index Huggers

Aug 20 2014 | 1:43pm ET

Peter Borish, who served as founding partner and director of research at Tudor Investment...

Lifestyle

Viking Manager In Rent Dispute

Aug 11 2014 | 4:14am ET

A hedge fund manager is demanding most of his money back from his former landlord...

Guest Contributor

Majority Of Inflows Go To Brand Name Hedge Funds

Aug 12 2014 | 9:00am ET

Since the market correction of 2008, a vast majority of hedge fund net asset flows...

 

Editor's Note

 

Futures Magazine

PREVIEW July/August 2014 Cover

Inside Futures' 500th Issue

The July/August 2014 issue is our largest in years—filled with the best trading strategies and stories from 43 years of being the primary publication for commodity, stock, options and forex traders.

The Alpha Pages

TAP July/August 2014 Cover

Real talk on alternative investments, business & finance

The Alpha Pages Editor's Note