Paulson Takes Blame For Rough First Half

Jul 22 2011 | 1:36pm ET

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%.


In Depth

Creating An Offshore Hedge Fund Dream Team: The Seven Key Players

Jun 26 2015 | 6:47am ET

If you want to set up an offshore hedge fund, like any great team, you’re only...

Lifestyle

Hedgies Set to Compete in Wall Street Decathlon

Jun 8 2015 | 12:37am ET

The Wall Street Decathlon — a 10-event physical challenge that will crown “Wall...

Guest Contributor

6 Essential Principles To Balance Your Investment Risk

Jun 26 2015 | 10:07am ET

In this article, financial expert Greg Silberman explores how to hedge a private...

 

Editor's Note