The John Paulson Way to Profits
Posted on Tuesday, February 3rd, 2009 | In Market CommentaryJohn Paulson (unrelated to Hank, ex-US Treasury Secretary), US hedge fund manager, shot to fame last year by capitalizing in spectacular fashion on the credit crisis by, amongst others, betting against a number of financial institutions.
The scoreboard shows his flagship Paulson Advantage Fund returning 36.7% net of fees for 2008. Total assets jumped from $12.5 billion at June 1, 2007 to $28.8 billion by the beginning of 2009.
A fascinating peep behind the curtain of the investment actions of the 78th wealthiest American on the Forbes 400 list comes to us courtesy of The New York Times’s DealBook, having obtained Paulson’s 28-page year-end report to his investors.
Paulson’s outlook for this year is summarized as follows:
“We remain bearish on the outlook for the US economy and believe that the recession will extend into late 2009 and likely into 2010. The sharp contraction in the global economy, the instability of the global financial system and the ongoing credit contraction are unlikely to be resolved in the first half of 2009. While the US stimulus package will likely cushion the decline, we don’t think it can halt the downturn and will likely have longer-term negative consequences.
“Although we are bearish on the economy, we are bullish on investment opportunities for our funds over the next year in the following areas:
• Long Distressed Mortgages
• Long Distressed Debt
• Debt Restructurings
• Bankruptcies
• Strategic Mergers
• Event Arbitrage
• Financial Recovery
“We see attractive opportunities in all of these areas. Given our favorable liquidity position and expertise in these areas, we believe we are uniquely positioned to take advantage of these opportunities in 2009 and beyond.”
Click here for Paulson’s year-end report.
Source: Zachery Kouwe, The New York Times DealBook, January 30, 2009 (hat tip: Paul Kedrosky).
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 About Prieur du Plessis (http://www.investmentpostcards.com)
Prieur du Plessis has 25 years’ experience in professional investment research and portfolio management. More than 1,000 of his articles on investment-related topics have been published in various regular newspaper, journal and Internet columns. He has also published a book, Financial Basics: Investment. Prieur is chief executive and principal shareholder of South African-based Plexus Asset Management, which he founded in 1995. The group conducts investment management, investment consulting, private equity and real estate activities in South Africa and other African countries. Plexus is the South African partner of John Mauldin, author of the Thoughts from the Frontline e-letter, and also has an exclusive licensing agreement with California-based Research Affiliates for managing and distributing its enhanced Fundamental IndexTM methodology in the Pan-African area. Prieur is 52 years old and lives with his wife, television producer and presenter Isabel Verwey, and two children in Cape Town, South Africa. His recreational activities include long-distance running, motor cycling, traveling and reading. |
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