Paulson Down 22% Through July

Aug 5 2011 | 1:09pm ET

Paulson & Co.'s annus horribilis continued into July—and shows no signs of stopping.

The New York-based hedge fund dug itself an even deeper hole last month, with most of its hedge funds—with the notable exception of its gold-denominated share classes—taking another bath.

The firm's largest fund, Advantage Plus, lost 4.6% in July and is down a whopping 22% for the year. Its flagship Advantage fund fell 3.3% on the month and is down 15% on the year.

Investors in the gold versions of both funds are doing much better, if not well: Advantage Plus gold-share clients are down 10% on the year after adding 1.5% last month, while Advantage clients are down just 2.1% after that fund rose 5.2% in July.

Indeed, investors who heeded firm founder John Paulson's advocacy in favor of gold have little to complain about. The firm's gold-only fund is up 2.5% on the year after soaring 11% in July. And every one of the firm's gold share classes is vastly outperforming its dollar-denominated counterpart.

The firm's Credit Opportunities Fund is up just 3.8% this year for dollar investors (down 1.3% in July), but it's up 13% for gold investors after rising 4.3% last month. Similarly, the Enhanced Fund is up 2.9% this year after dropping 3% last month, but its gold shares are up 12% after a 2.8% jump last month.

And Paulson's Recovery Fund, battered by its investment in Chinese timber company Sino-Forest and by the anemic recovery of the U.S. economy, saw its dollar-denominated gains wiped out last month by a 4.9% drop. But its gold shares rose 1.6% to end July up 5.1% on the year.

Don't expect Paulson to throw in the towel, however: Paulson Advantage was down by double-digits as late as September of last year but finished 2010 up 11%. Still, it may be too much to ask for the recovery to begin this month: Two of Paulson's largest holdings, Alpha Natural Resources and Mylan Inc. have both taken a beating in August's early going.


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