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

GSAM's Papagiannis: Liquid Alternatives For The Long Run

Apr 21 2017 | 8:44pm ET

Interest in liquid alternatives cooled a bit last year amid a broad shift in investor...

Lifestyle

Aston Martin Returns To Debt Market As DB11 Drives Turnaround

Mar 31 2017 | 5:21pm ET

James Bond’s preferred carmaker is returning to the public debt markets for the...

Guest Contributor

Debunking Conventional Investment Wisdom (Part II)

Apr 17 2017 | 5:56pm ET

The alternative investment industry is currently replete with buzzwords around data...