With just a few weeks left to convince investors not to redeem from its hedge funds, Paulson & Co. founder John Paulson held a long conference call with investors to explain why his funds were down by double digits in the first half—and promising to do better.
Paulson admitted that he has been "too aggressive" this year, particularly with his disastrous investment on Chinese timber company Sino-Forest Corp. and his bets on U.S. banks. He pledged to improve the firm's coverage of Asia to combat errors like the first and to cut the firm's overall exposure to combat the latter.
Paulson said that the European debt crisis and a slow U.S. economic recovery had hurt the firm. But he spent more than an hour-and-a-half explaining his own errors, among them Sino-Forest, which lost most of its value after a short-seller accused the company of overstating its timberland holdings, Reuters reports.
Paulson said he "should have been more receptive" to the possibility that requests to borrow Sino-Forest shares and rumors of problems at the company could cost the hedge fund. Paulson also said he would "strengthen our research capabilities" in Asia by adding a specialist in Hong Kong.
As for his other big bet, on banks, Paulson said he would make it a good deal smaller.
"Eight-one percent [long exposure] was way too high," he conceded. "We cannot operate the fund at that level." Paulson said he has since cut that exposure, including to "disappointments" like Citigroup, to about 60%, and that he hopes to cut it to 50%.