Billionaire investor John Paulson, whose bets have long been closely followed on Wall Street, told investors on Thursday that the value of his biggest hedge fund portfolios fell last month as global markets sold off.
The firm's flagship Paulson Partners portfolio dropped 4.2 percent, trimming its year-to-date gain to 6.52 percent. The Paulson Advantage Fund, once a favorite with wealthy individual investors, meanwhile, lost 4.9 percent and is now down 3.6 percent for the year. The Special Situations Fund posted the firm's biggest losses with a drop of 8.35 percent in August and a 11.6 percent decline so far in 2015.
Paulson's August losses are in line with the broader market's decline and hits taken by other big hedge funds. But investors said the losses are especially painful for the $20 billion firm because they largely wipe away a strong start to the year and the chance of rebounding from a tough 2014.
The fund manager did not give an explanation for the losses, but big bets on healthcare stocks, including Shire and Valeant, weighed on returns when these names and others were battered in August.
Fears about slower growth in China, uncertainty over an expected U.S. interest rate increase and falling oil prices all contributed to August's rout, which hurt many big-name fund managers, including Nelson Peltz, Larry Robbins, David Einhorn, and William Ackman.
Paulson, who is among the hedge fund industry's best-paid investors, is known for patiently sticking with his bets, such as the one he placed against an overheated housing market in 2007 and those made on gold a few years later.
More recently Paulson has bet that Puerto Rico, mired in a debt crisis, will recover and attract fresh visitors to its beaches and hotels. He plans to refurbish the bankrupt San Juan Beach Hotel in Condado and holds other tourism properties on the island.
Paulson offers a large number of portfolios and is planning to roll out more later this year, but two big banks, Bank of America and UBS, in July closed down some options for wealthy clients to access his Advantage fund because of concerns about performance.
Still there are plenty of institutional investors sticking with Paulson. "August doesn't look so good, but he's still our biggest winner for the year," one institutional investor said.
Paulson's credit fund dropped 2.3 percent last month and is off 2.6 percent year to date.