John Paulson, the billionaire investor, has taken public his efforts to get The Hartford Financial Services Group to split into two companies, says the FT. The Hartford, like other insurers, has been under pressure in its life insurance business as interest rates hover near zero, making it difficult to generate the income to cover pay-outs on products like annuities. At the same time, it has participated in an industry-wide increase in pricing in its separate property and casualty business to make up for disaster-related losses last year. Mr Paulson, the largest shareholder in The Hartford with an 8.4 per cent stake, published a letter to the company on Tuesdayblaming its underperformance on the combination of its two businesses. He said it is too complex for analysts to properly value and that most other insurers have chosen to focus on one or the other business. Meanwhile Bloomberg reports Mr Paulson sold his entire stakes in Citigroup and Bank of America in the fourth quarter before the shares rallied. Paulson & Co, which owned $643m worth of Citigroup at the end of the third quarter, had sold its entire 25.1m shares as of December 31, the firm said on Tuesday in a filing with the SEC. He also sold $394m worth of Bank of America, or 64.3m shares. It also sold its 998,900 shares of BlackRock valued at $146m. Read more
John Paulson’s hedge fund has lost 46 percent in 2011 through November in one of his largest hedge funds, says Bloomberg. Paulson’s Advantage Plus Fund, which seeks to profit from corporate events such as takeovers and bankruptcies and uses leverage to amplify returns, declined 3.6 per cent last month. The fund’s gold share class dropped 2.7 per cent in November and 29 per cent this year. The losses came in a highly volatile month for stock markets, says the FT, with Paulson’s troubles reflecting broader challenges for hedge funds. Read more
Paulson & Co, the giant US hedge fund run by billionaire investor John Paulson, has warned that in a “worst case” scenario, it could suffer redemptions equivalent to between a fifth and a quarter of its assets by the end of the year, the FT reports. In a third-quarter call with investors held on Tuesday, Mr Paulson sought to play down concerns about the future of his $30bn hedge fund amid steep losses in recent months and growing fears over the health of the US economy. Several people on the call told the FT that Mr Paulson – best known for his spectacular bets against the US housing market in 2007 – spoke strongly of his “100 per cent” commitment to continue to run his funds, none of which will be wound down.
John Paulson, one of the world’s most successful hedge fund managers, has extended losses throughout August to leave his flagship fund down almost two-fifths for the year, the FT reports. His Advantage Plus fund was down 38.7 per cent for the year as of Friday, according to a person familiar with the fund’s performance, having lost 22 per cent in the first 19 days of the month. The fund, which follows a strategy of trading around corporate events, was hit by the plunge in the price of Hewlett-Packard after the company announced it would pay $11bn for UK software maker Autonomy and consider a spin out of its PC business. At the end of June, Paulson & Co, which manages about $35bn, held 23.5m shares in HP, according to regulatory filings, a stake then worth $855m. Assuming that the hedge fund had not reduced its investment, the shares had lost more than a third of their value as of Friday. The HP share price has risen this week, as have share prices for banks, such as Citigroup and Bank of America, in which the fund has large positions. Read more
John Paulson, one of the world’s most successful hedge fund managers, has extended losses throughout August to leave his flagship fund down almost two-fifths for the year, the FT says, citing a person familiar with the fund’s performance. His Advantage Plus fund was down 38.7 per cent for the year as of Friday, having lost 22 per cent in the first 19 days of the month. The fund, which follows a strategy of trading around corporate events, was hit by the plunge in the price of Hewlett-Packard after the company announced it would pay $11bn for UK software maker Autonomy and consider a spin out of its PC business. At the end of June, Paulson & Co, which manages about $35bn, held 23.5m shares in HP, according to regulatory filings, a stake then worth $855m. Meanwhile Brevan Howard, the world’s largest macro hedge fund, has made close to $1.5bn over the past three weeks on the back of turmoil in the global markets, also in the FT.
Bank of America moved to shore up its capital levels by selling one of its international credit cards businesses, the FT says, but the boost to investor confidence was diminished after regulatory filings showed that Paulson & Co had dumped more than half its stake in the largest US bank. BofA, whose stock has fallen by more than 40 per cent this year, said Monday it had agreed to sell its Canadian cards business for about $8.5bn to TD Bank and pledged to sell its bigger UK and Irish cards portfolios. Its shares rose 7.8 per cent on Monday to $7.76. Shares in TD rose 1 per cent. Paulson & Co cut its stake in both BofA and Citigroup, but FT Alphaville points out the fund continued to show interest in US financials by raising its Wells Fargo stake. Read more
The flagship fund of Paulson & Co, the world’s third-largest hedge fund, lost more than 10 per cent of its value in the first week of August alone, the FT reports. At Friday’s close, the Advantage Plus and unleveraged Advantage strategies were down 31 per cent and 21 per cent respectively for the year, as big bets on economic recovery and the health of the financial sector went against the fund. The losses came before a volatile three days in the markets, during which most hedge fund managers have struggled to stay in the black. John Paulson had made billions on the fortunes of the banks through the financial crisis, first betting on a collapse in the value of mortgage-backed securities, and then, last year, riding the recovery in bank share prices upwards. Yet high-profile losses this year and large positions in financial stocks, including Bank of America and Citigroup, had left the two funds down 21 per cent and 15 per cent respectively at the end of July and Paulson & Co the subject of speculation that investors would start to pull their cash. Read more
The flagship fund of Paulson & Co, the world’s third-largest hedge fund, lost more than 10 per cent of its value in the first week of August alone, the FT reports. At Friday’s close, the Advantage Plus and unleveraged Advantage strategies were down 31 per cent and 21 per cent respectively for the year, as big bets on economic recovery and the health of the financial sector went against the fund. High-profile losses this year and large positions in financial stocks, including Bank of America and Citigroup, had left the two funds down 21 per cent and 15 per cent respectively at the end of July and Paulson & Co the subject of speculation that investors would start to pull their cash.
Lehman Brothers Holdings said it settled $20bn of intercompany claims with liquidators for Lehman Hong Kong, Bloomberg reports. The agreement, which is subject to court approval in the US and Hong Kong, is part of Lehman’s efforts to gather support for a $65bn liquidation plan. It said last month that creditors holding more than $100bn in claims signed their support for the company’s latest payout plan, which allots more money to a group including Goldman Sachs and less to bondholders including Paulson & Co.
Some of the world’s largest hedge fund managers have been left nursing significant losses after two months of volatile markets, reports the FT. Paulson and Co.’s flagship Advantage Plus fund dropped 11.5 per cent in June, according to an investor. The $9bn fund is down 18.4 per cent so far this year. Even veterans of macro trading have been under pressure, with the MLM Macro fund dropping 9.2 per cent for June as at June 24. Hedge funds which sought pickings in the muni bond market fared better, the WSJ reports. Funds which bought up speculative “tobacco bonds” saw returns of more than 10 per cent. Read more
Some of the world’s largest hedge fund managers have been left nursing significant losses after two months of volatile markets amid growing fears over the state of the global economy, says the FT. Monthly performance numbers for the industry, tracked by Hedge Fund Research, due to be released on Friday are expected to confirm a lacklustre first half of the year with the average fund manager returning little more than 2 per cent. Big-name losers over the past six months have included the giant Paulson & Co, the UK’s Lansdowne Partners and many of the world’s top commodity managers. Even veterans of macroeconomic trading have been caught out. Among the worst hit over the past month was the MLM Macro fund, which had dropped 9.2 per cent for June as at June 24. Funds run by Paul Tudor Jones, Moore Capital, Caxton Associates, and Highbridge Capital are also among those recording losses in the first half. Such losses are prompting many in the industry to scale back risk, with many managers now sitting on sizeable cash piles. Meanwhile the WSJ reports some muni hedge funds benefited from strong performance of so-called tobacco bonds in June. Read more
Paulson & Co has made more than $550m from recoveries in the value of bonds it bought in Lehman Brothers after its default, the FT reports. The fund made more than 2,000 trades buying $6.8bn of face-value debt for $890m in the two and a half years after September 15, 2008. Under Lehman’s final bankruptcy agreement, owners of bonds will receive 21.1 cents on the dollar, versus the 17.4 cents proposed initially by the Lehman estate. Mr Paulson’s funds hold the bonds at an average of 7.3 cents on the dollar. If Paulson can gain recoveries of 26 cents — the market price based on the view that Lehman’s assets will rise in value — the profit on the position will increase to $780m. Read more
Paulson & Co, the hedge fund that made billions from betting on a collapse in mortgage-backed securities during the financial crisis, has made more than $550m from a recovery in the value of bonds it bought in failed investment bank Lehman Brothers. The world’s third-largest hedge fund has made a profit of $554m before legal fees, on more than 2,000 trades in Lehman bonds that started the day the investment bank filed for bankruptcy in 2008, according to an analysis of court documents by the FT. The profit will be realised by a settlement between warring creditors to the largest corporate failure in history, a deal partly driven by hard bargaining by Paulson & Co and allies. Read more
John Paulson is not the only prominent fund manager hurt by the share plunge of Sino Forest, the Toronto-listed Chinese company, reports Bloomberg. Christopher Davis, a value investor who researches stocks and holds them for long periods, owned 13% of the Chinese tree-plantation owner as of April 29 through his Arizona- based firm Davis Selected Advisers. The value of that stake has since dropped 92% or more than $600m, after Muddy Waters, an investment firm run by Carson Block, said Sino-Forest overstated its timber holdings. Davis’s firm, with $71bn in assets, held 30.9m Sino-Forest shares as of April 29, making it the second-biggest owner before Paulson & Co. dumped its stake, according to Bloomberg. The FT earlier reported that Paulson & Co lost more than $500m after selling its entire holding in Sino Forest. Read more
Only one of these exhibits is real:
Exhibit A: Read more
Paulson & Co has lost more than $500m after selling its entire holding in Sino Forest, the Chinese forestry company fighting allegations of fraud, the FT reports. The sale adds to the pressure on Sino Forest as it attempts to fight a series of accusations by short seller Carson Block, and represents a high-profile setback for John Paulson, Paulson & Co’s founder, as his hedge fund struggles with recent poor performance. “Due to the uncertainty over Sino Forest’s public disclosures and financial statements, we have sold our stock and await the results of the independent committee’s investigation,” Mr Paulson said in a statement. On Tuesday, Fitch Ratings cut Sino Forest’s long-term foreign currency issuer default rating and senior unsecured debt rating to BB- from BB+ and put the ratings on negative watch, attributing the move to the fact that the company did not have direct access to the profits of its main operating subsidiaries. Read more
Paulson & Co has lost more than $500m after selling its entire holding in Sino Forest, then FT reports. The sale adds to the pressure on Sino Forest as it attempts to fight a series of accusations by short seller Carson Block, and represents a high-profile setback for John Paulson, Paulson & Co’s founder, as his hedge fund struggles with recent poor performance. Paulson & Co was the largest shareholder in Sino Forest when Muddy Waters, Mr Block’s research firm, published a report on June 2 accusing the group of overstating its ownership of forestry assets in China. The company has denied the allegations and appointed an independent committee to examine the report. Since the report was published, shares in Sino Forest have fallen by more than 80 per cent. Read more
FT AlphaTilt, the swashbuckling blogging portmanteau, noticed on June 2 that Paulson & Co was listed as owning by proxy 14.13 per cent of the outstanding shares in Sino-Forest Corporation.
The timber firm’s troubles were more bad news for the world’s third-largest hedge fund, whose main fund lost 6 per cent of its value in May. Read more
A group of Lehman Brothers creditors including Paulson & Co has come under fire from rivals for a bid to have trades disclosed, says Bloomberg. Paulson’s creditor group is pressing for rivals to its liquidation plan to disclose how much they paid for Lehman debt before voting on its liquidation plan. Citigroup and Bank of America called the move a ‘fishing expedition’ and an ‘attempt to intimidate parties’ respectively. A liquidation plan led by Goldman would see investors repaid at 16 cents in the dollar whereas the Paulson plan envisages around 25 cents. Read more
Paulson & Co, the world’s third-largest hedge fund, saw the value of its flagship fund drop close to 6 per cent in May, echoing losses across the industry, the FT reports. The loss tops negative returns in the first quarter at the $37bn New York-based money manager, famed for the spectacular returns gained by shorting the US mortgage market in 2007, and will again raise questions over its portfolio’s volatility. Meanwhile, the Wall Street Journal said on Saturday that Paulson’s fund owned nearly 35m of shares in Sino-Forest, the Chinese forestry company accused of fraud. Paulson’s paper loss on the stock is an estimated $323m. Read more
A series of scandals at Chinese companies listed in New York, Hong Kong and Toronto has unsettled investors and raised questions about all Chinese companies seeking to raise capital abroad, reports the FT. In recent months, short-sellers have attacked an unprecedented number of foreign-listed Chinese companies listed, accusing them of fraud or other actions. This has driven down their share prices and inflicted losses on some top investors. Sino Forest, a Chinese forestry group listed in Toronto, lost more than two-thirds of its market value from Thursday after Muddy Waters, a research firm founded by short-seller Carson Block, accused it of overstating sales and asset values. Sino Forest’s denial on Friday failed to stop the slide, which inflicted paper losses of nearly $500m on Sino Forest’s top shareholder, the $37bn Paulson & Co hedge fund. Read more
Paulson & Co, the world’s third-largest hedge fund, saw the value of its flagship fund drop to nearly 6% in May, echoing losses across the industry, reports the FT. The loss tops negative returns in the first quarter at the $37bn money manager, and raises more questions about its portfolio’s volatility. John Paulson, group founder, has maintained a bullish view on the US economy and equity markets, even as many peers have cut their exposure. May’s loss means the $9bn Paulson & Co Advantage Plus fund is down 7.6% so far this year. The average hedge fund lost 1.39% over the month, according to Hedge Fund Research, with “event-driven” strategies such as that operated by Paulson & Co’s main fund down on average 0.62%. Also, Paulson’s gold fund dropped 6.39% in May, erasing much of its 8.5% April gain. The fund – the world’s largest non-sovereign gold investor – is up 0.9% in the year. Separately, reports the FT, the group was also hit by last week’s share price slide of Chinese group Sino Forest.
A three-way battle over the remnants of Lehman Brothers Holdings is coming to a head, as the defunct investment bank’s estate fights with top hedge funds and Lehman’s former rival Goldman Sachs over how to divide $61bn in assets, reports the WSJ. In one corner is hedge fund manager John Paulson, who has been snapping up bargain-priced debt of Lehman and is now one of its biggest creditors. His firm, Paulson & Co, is leading a group of hedge funds pushing one proposal for unwinding the failed firm. In another is Goldman, which on Monday led a group of banks in presenting a plan that would pay a larger share of proceeds to them. Both oppose a previous proposal filed to the bankruptcy court by Lehman’s estate manager. The battle’s outcome could set a precedent on dealing with creditors of global companies after they fall into bankruptcy protection. Read more
Some more insights into the (financial) traps and machinations of Japan’s post-March 11 markets and their impact on investors — this time from the FT’s Sam Jones, formerly of the FT Alphaville’s parish.
As he writes on Thursday: Read more
Some of the world’s largest hedge funds and private equity groups have held talks with Spain’s troubled savings banks, known as cajas, as they rush to secure €15bn ($21.3bn) in new capital to avoid a state bail-out, reports the FT. Funds including Paulson & Co, the US hedge fund, and buy-out groups Cerberus and Apax have held meetings in recent months with several Spanish savings banks to discuss possible investment. While Spain’s large listed banks have been largely protected from the domestic downturn due to their large international operations, the privately held cajas have been left desperate for capital after the souring of loans made during the country’s property bubble. The preliminary meetings with foreign investors, with cajas including Bankia, Banca Civica and smaller rivals, are believed to have stalled after the banks balked at the low valuations offered by foreign investors, investors said. Read more
The top 10 hedge funds made $28bn for clients in the second half of last year, $2bn more than the net profits of Goldman Sachs, JPMorgan, Citigroup, Morgan Stanley, Barclays and HSBC combined, according to new data, reports the FT. Even the biggest of the hedge funds have only a few hundred employees, while the six banks employ 1m between them. According to the data, calculated by LCH Investments, which invests in hedge funds run by Edmond de Rothschild Group, the top 10 funds have earned a total of $182bn for investors since they were founded, with George Soros making $35bn for clients – after fees – since he set up his Quantum Fund in 1973. But John Paulson’s Paulson & Co is closing in on Soros’s fund as the hedge fund to have made most money for investors, after scoring net gains of $5.8bn in the second half of 2010. Read more
Blackstone Group has agreed to pay $9.4bn for the US property assets of Australia’s Centro Properties, reports the FT, citing people close to the deal. The US buy-out group beat two other bidders in the final round of an auction: one group led by Morgan Stanley, Starwood Capital and Paulson & Co; and the other, NRDC Equity Partners and Area Property. Centro is expected to announce the deal on Tuesday, as well as a debt-for-equity swap and merger at its two Australian assets. The deal – which essentially values the company at 77 or 78 cents on the dollar – would deliver windfall profits to hedge funds that bought Centro debt from banks for as low as 45 cents. The biggest debtholders include Appaloosa and Davidson Kempner, as well as Paulson & Co. Lex says that Centro’s lesson for distressed property investors is to “ignore rising asset values”. Read more
US hedge fund manager John Paulson has pared his stakes in Citigroup and Bank of America, both among Paulson & Co’s biggest stock holdings by market value, reports DealJournal, citing the group’s quarterly snapshot of investment holdings as of Dec 31. Paulson reported buying bonds of Alcoa, and shares of BlackRock, Seagate and J. Crew since the end of the 2010 third quarter. Paulson reporting owning 424m shares of Citi at the end of September. On Monday, he disclosed owning nearly 414m shares. In the same period, Paulson’s holding of 138m BofA shares was cut to about 124m; he also holds BofA warrants. Dow Jones adds that Paulson also trimmed back his holdings in Wells Fargo in the period. Read more
Paulson & Co may well have made more than $1bn from its long position in Citigroup, but the firm’s really big bet — the one that has seen the firm’s assets swell by around $8.4bn over the past 12 months (before, ahem, fees) — has been gold.
Not that that many external investors have been beneficiaries, of course. A third of Paulson & Co’s $36bn in assets under management may well be denominated in the gold share classes, but a lot of that is Mr Paulson’s — and some of his employees’ – own wealth (employees of the firm now account for 42 per cent of capital). According to the firm’s investor letter: “Approximately 178 of our investors, representing about 31 % of our investors and 38% of our AUM, have elected to be in our Gold Share classes.” Read more
Paulson & Co, the world’s third-largest hedge fund manager, has told clients it has made more than $1bn from its stake in Citigroup over the past 18 months and expects US growth to accelerate this year, the FT reports. Citigroup was the most profitable position for Paulson’s flagship Advantage fund, which like all of the US fund manager’s funds has been highly geared to an upswing in US economic prospects. Paulson’s gains come despite investor fears that its funds have grown too large. “We have proved our ability to perform at current asset levels,” the letter added, arguing that market opportunities are enormous and all of the funds could be much larger. Read more