(Bloomberg News) John Paulson, who told clients in February that gold is his best long-term bet, lost 13 percent in his Gold Fund in March as mining companies slumped, according to a person with knowledge of the returns.
The losses leave the fund, which can buy derivatives and other gold-related investments, down 6.5 percent since the start of this year, said the person, who asked not to be identified because the fund is private. Paulson & Co., Paulson's $24 billion firm, is the largest individual holder of AngloGold Ashanti Ltd. and the second-biggest owner of NovaGold Resources Inc., both of which lost about 13 percent last month.
Paulson, 56, is seeking to reverse record losses last year from an ill-timed bet on an economic recovery, which caused him to scale back risk before stock markets started to rally late in 2011. The hedge-fund manager told investors in February that his Gold Fund will outperform his other strategies over five years, and that it is the best protection against currency debasement, rising inflation and a possible breakup of the euro, a person with knowledge of the matter said at the time.
Bullion fell 2.3 percent last month after a strike by jewelers in India, the biggest buyer, curbed demand and on lowered expectations that the Fed would offer fresh stimulus amid signs the U.S. economy is gaining momentum.
AngloGold is the largest position in Paulson's Advantage Plus Fund, which seeks to profit from corporate events such as takeovers and bankruptcies and uses leverage to amplify returns, according to a year-end letter the firm sent to investors. The fund has a 25 percent allocation to gold-related investments, Paulson said in the letter.
The fund fell 5.5 percent in March and 2.2 percent in the first three months of 2012, erasing its yearly gain. Its gold share class declined 5.4 percent last month and fell 0.7 percent this year.
The Advantage Fund, which employs a similar strategy, decreased 4 percent last month and 1 percent this year. Its gold shares slumped 3.8 percent in March and gained 2.7 percent in 2012.
Armel Leslie, a spokesman for Paulson & Co., declined to comment on the firm's returns.
The Recovery Fund, which invests in assets Paulson believes will benefit from a long-term economic rebound, such as financial services, insurance, hotels and real estate companies, climbed 2.8 percent last month and 9.5 percent this year. Its gold shares gained 1.5 percent in March and 12 percent in 2012.
The firm's Enhanced Fund, which invests in the shares of merging companies, rose 0.9 percent in March, bringing gains this year to 13 percent. Its gold share class gained less than 0.1 percent last month and 15 percent in the first three months of the year, surmounting its so-called high-water mark, or previous peak value, the person said. Managers whose funds fall below that mark aren't able to charge performance fees until they recoup losses.