The hedge fund manager also told investors he’s shorting the euro to hedge against the European crisis.
Paulson’s flagship Advantage fund is down considerably this year, due in large part to a bad bet on Chinese plantation operator Sino-Forest, which resulted in steep losses for the firm.
The stock nosedived in the wake of a report by short-seller Carson Block, who compared the company to the Madoff Ponzi scheme.
But Paulson and Co’s financial stocks didn’t perform as well as hoped, either.
“He said his team of analysts did not expect the magnitude of the mortgage problems to be so great.”
So he now likes Capital One and Wells Fargo, while Bank of America — which was a huge position for Paulson for a long time — has been a huge let down.
The hedge fund is now looking at 60% long exposure (with plans to cut it even further), down from over 81%.
“80-one per cent was way too high,” Paulson said, according to Reuters. “We cannot operate the fund at level.”
(Hat-tip to Zerohedge)