John Paulson admitted in his quarterly conference call that he had made a bad bet on a recovery in the domestic economy, according to Dealbook’s Azam Ahmed.
And – he said he plans to reduce the firm’s exposure to the stock market more broadly, according to several people on the call who spoke to Ahmed.
Paulson also said he plans to reduce leverage in Advantage Plus.
Paulson had been one of the biggest bulls on the economy. These two moves appear like his investment strategy is remaining bullish, investing in a recovery, but he’s dialling it back.
Most of Paulson’s funds are long a recovery — the Recovery fund invests in assets that will benefit from a recovery, in real estate for example, Credit Opportunities invests in distressed debt, and his Advantage funds are long/short equity funds, which have heavy exposure to the stock market.
Now that he’s dialling back both his market exposure, and his leverage, it’s a sign that Paulson has less faith in a recovery. (And that he wants to hold on to his investors.)
His performance numbers:
The Credit Opportunities fund: -18% YTD through September
The Advantage fund: -28% YTD through September
The Advantage Plus fund: -47% YTD through September
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