John Paulson: Laying a golden egg

Investors with legendary hedge-fund manager John Paulson aren’t taking a shine to his gold metal performance — in fact, some are heading for the exits.
Investors are upset over Paulson’s huge gold positions — specifically, his outsize holding of AngloGold Ashanti, down 20 percent this year, The Post has learned.
That has dragged down two of Paulson’s funds.
“I would be happier if he cut the gold position in half,” says one investor who put in a notice to take his money out of the fund in June. “He would have been up 4 percent in the first quarter if it weren’t for the goddamned gold.”

Instead, Paulson’s gold-heavy funds — Paulson Advantage and Paulson Advantage Plus — are down in the high single digits.
Gold bets account for 25 percent of the portfolio in Paulson’s Advantage funds, which are in the red again this year — after tanking in 2011. The concentration is even worrying some Paulson insiders, a source told The Post.
The two funds manage about $8.5 billion, or one-third of the firm’s capital. About half of the firm’s capital is from outside investors.
Paulson made the history books with his 2007 subprime short that turned him into an overnight sensation. Investors in his funds were amply rewarded — and the hoi polloi jumped aboard.
Last year’s gut-wrenching losses tested their resolve but by and large, these investors stuck with Paulson.
Through the first quarter, Paulson has told investors that redemptions were just 2 percent of the firm’s $24 billion of capital. The same amount is expected to come out this quarter, says a source close to the firm.
But industry insiders reckon that Paulson’s inability to turn these two funds around this year could lead many more investors to throw in the towel. One more problem: a reliance on bank platforms.
After his fame rose, Paulson began raising billions of dollars through bank hedge-fund platforms, which allow individuals to avoid the $10 million minimum investment to get into a Paulson fund.
This money could become a problem. Two of these banks — Morgan Stanley and Citibank — have put Paulson on a “watch” list, which means they won’t add any new money for three months. The two have about $500 million invested in Paulson.
One of Citi’s investors has sued Paulson in a Florida court over last year’s losses.
Both banks declined to comment, as did Paulson.
A source close to the firm acknowledges that about 20 percent of Paulson investors are still underwater. Most are in the Advantage funds.
The 56-year-old investor became enchanted with gold — including gold mining stocks and the SPDR Gold trust — after the financial crisis as he became worried about inflation caused by government bailouts.
Paulson’s gold stakes include AngloGold Ashanti, a South African mining company, where his 9 percent stake has long been the biggest single investment. The company accounts for 13 percent of Paulson Advantage’s long positions — huge for a hedge fund.
Investors think Paulson is doubling down on gold in an effort to revive his reputation.