Pellegrini Hammered By Paulson Losses

Jul 11 2012 | 1:10pm ET

A former John Paulson lieutenant is being punished for his belief in his former boss.

Paolo Pellegrini, who helped engineer the subprime mortgage strategy that put Paulson & Co. on the map, left Paulson to start his own hedge fund three years ago only to pull the plug on that effort less than a year later. Then, a year-and-a-half ago, he invested "a significant portion of my personal money" in Paulson's Advantage Plus Fund.

Pellegrini did so just in time to see that fund lose more than half its value last year. And the fund, Paulson's largest, continues to lose ground this year, having shed a further 16%.

"I'm disappointed but I don't fault them for not doing their work," Pellegrini told The Wall Street Journal. "This is a very difficult market to predict… as an investor, it's like a game of Russian roulette."

But, Pellegrini said, "among global fund managers, John's one of the most talented." And his team works "very hard on their investment ideas and generally get things mostly right."

The Journal reports that Pellegini invested between $10 million and $20 million with Paulson, and that he redeemed half of what was left at the beginning of this year.

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