By Kelly Bit and Saijel Kishan
(Updates with hedge fund industry returns in fourth paragraph.)
Aug. 4 (Bloomberg) -- John Paulson, the billionaire hedge fund manager who is betting on an economic recovery by 2012, has lost 22 percent this year in his biggest fund, according to an investor, as global stock markets slumped and the U.S. economy showed signs of slowing.
Paulson?s Advantage Plus Fund, which uses strategies designed to profit from corporate events such as takeovers and bankruptcies, lost 4.6 percent last month, said the client, who asked not to be identified because the information is private. The fund?s gold-denominated share class has lost 10 percent this year, after advancing 1.5 percent in July.
Paulson, 55, whose New York-based firm Paulson & Co. manages $35 billion, has trimmed investments in banks including Bank of America Corp. and Citigroup Inc. as shares of those companies fell this year. U.S. data showed manufacturing grew at the weakest pace in two years, spending unexpectedly fell and the services industries grew at the slowest pace since February 2010.
The hedge fund industry has gained 4.4 percent this year after rising 0.1 percent last month, according to the Bloomberg aggregate hedge-fund index.
Paulson investors can choose between dollar- and gold- denominated versions for most of Paulson?s funds. The metal jumped 8.5 percent last month as investors sought a haven amid a legislative stalemate over raising the U.S. debt ceiling and concerns that Europe?s sovereign debt crisis may be spreading. The firm?s Gold Fund, which can buy derivatives and other gold- related investments, has gained 2.5 percent this year after soaring 11 percent last month.
Armel Leslie, a spokesman for Paulson, declined to comment.
Largest Holdings
August may continue to be a tough month for Paulson. His firm was the largest holder of Alpha Natural Resources Inc. and Mylan Inc. as of the end of the first quarter, according to documents filed with the Securities and Exchange Commission. Both companies were among the biggest losers in the Standard & Poor?s 500 Index so far this month, falling 19 percent and 14 percent, respectively. If he still holds those stakes, he would have lost about $180 million in August.
Transocean Ltd., Paulson?s third-largest holding, has fallen 10 percent this month and New York-based Citigroup, the hedge fund?s fourth-largest holding, is down 7.1 percent. Anadarko Petroleum has fallen 10 percent so far this month.
Paulson lost 11 percent last year through August with his $9 billion flagship fund before posting profits by the end of the year and making about $5 billion personally.
Recovery Fund
The hedge fund declined 4.4 percent in March to erase this year?s early gains, was little changed in April, slumped 6 percent in May and lost 11 percent in June as Paulson sold its shares of Sino-Forest Corp., the Chinese forestry company accused by a short-seller of overstating its assets.
Paulson?s dollar-denominated Advantage Fund, which employs a similar strategy to Advantage Plus, has dropped 15 percent this year, after falling 3.3 percent in July. The gold share class curbed its annual decline to 2.1 percent after gaining 5.2 percent last month.
The Recovery Fund, which invests in assets Paulson believes will benefit from a long-term economic recovery, is down 3.7 percent this year after declining 4.9 percent last month, while its gold share class is up 5.1 percent this year following a July gain of 1.6 percent.
The Paulson Partners Enhanced Fund, which invests in the shares of merging companies, increased 2.9 percent this year after falling 3 percent last month. The gold share class is up 12 percent in 2011 after advancing 2.8 percent in July.
Sino-Forest Corp.
Paulson?s Credit Opportunities Fund limited annual gains to 3.8 percent after falling 1.3 percent last month. Its gold shares gained 13 percent this year after a 4.3 percent in July.
Sino-Forest, which Paulson & Co. held in its Advantage funds, has plunged about 65 percent from its closing price on June 1, the day before Carson Block?s Muddy Waters LLC issued a report accusing the Hong Kong- and Ontario-based company of overstating timberland holdings and production in Yunnan province. Paulson told clients in June that his fund lost C$462 million ($489 million) that month on the investment, which it sold off as of June 17.
--With assistance from Katherine Burton in New York. Editors: Steven Crabill, Josh Friedman
To contact the reporters on this story: Kelly Bit in New York at kbit@bloomberg.net; Saijel Kishan in New York at skishan@bloomberg.net
To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net
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