Billionaire John Paulson, the hedge- fund manager seeking to reverse two years of losses in some of his strategies, lost 27 percent in his Gold Fund last month after the precious metal and related securities plummeted, according to two people familiar with the matter.
The loss brings the strategy’s decline to about 47 percent this year, said the people, who asked not to be identified because the information isn’t public. The fund is made up primarily of Paulson’s own money, one of the people said. The strategy had $700 million at the end of March.
Gold fell 7.8 percent last month, including the biggest two-day decline since January 1980, as the U.S. economic recovery gained momentum, the dollar rose and Federal Reserve policy makers signaled they may scale back asset purchases, curbing demand for the metal as a haven. Bullion producers slumped 20 percent, including reinvested dividends.
Armel Leslie, a spokesman at Walek & Associates for New York-based Paulson & Co., declined to comment on the returns. Paulson’s firm oversees about $18 billion in assets.
The Advantage Plus Fund, which seeks to profit from corporate events such as takeovers and bankruptcies and has a portion invested in gold miners, fell 0.7 percent in April and rose 3.9 percent this year, one of the people said. The Advantage Fund, which employs a similar approach without adding leverage, declined 0.9 percent last month and rose 2.6 percent in 2013, according to the person. The strategy had $4.5 billion in assets.
All of the gold share classes slumped last month except for Paulson’s Recovery Fund, which makes bets on investments designed to benefit from a long-term economic advance, the person said. Investors can choose between gold- and dollar- denominated versions of most of the firm’s funds.
The firm reiterated in a letter to clients yesterday that gold stocks’ current valuations are at historic lows and offer considerable upside, the person said. Paulson has said gold is the best protection against currency debasement and inflation, a sentiment echoed earlier this month by Paul Singer’s Elliott Management Corp.
In contrast, Coutts & Co. scaled back gold holdings as prices fell through $1,600 an ounce, saying that a return to the peak isn’t likely unless there’s a crisis in the Middle East, a weaker dollar or a jump in inflation. The private-banking division of Royal Bank of Scotland Plc holds about 1 percent to 2 percent in its portfolios, compared with 6 percent to 7 percent at the end of the third quarter, Gary Dugan, Coutts chief investment officer for Asia and the Middle East, said in an interview.