Hedge fund billionaire John Paulson, the legendary investor who profited big time from his bets against the subprime housing market, is getting absolutely crushed this year.
Not only is his hedge fund Paulson & Co. showing dismal numbers with his flagship fund down around 28% YTD, but he’s been the target of media criticism with his fund’s poor performance.
CNN Money: Investor John Paulson: Alone at the bottom
MarketWatch: Don’t mess up like John Paulson
The thing is Paulson might in fact be someone who simply got extremely lucky back in 2008. And it could be that his lucky streak is coming to an end.
This makes us wonder, what could this potentially do to someone psychologically if they were regarded as this extremely talented investor, but were in fact just someone who got really lucky once?
In psychological terms, what we are referring to is known as the “Imposter Syndrome.”
This syndrome involves feelings of insecurity, fear of being discovered and feeling underserving or successful as a result of luck rather than talent, Manhattan-based psychologist Dr. Joseph Cilona told us.
What’s more is media criticism can exacerbate these feelings.
“Someone that believes their success was almost entirely due to luck rather than merit and that has been extensively discussed in the media is very likely to struggle with fears and anxieties about being exposed,” Cilona said.
“These kinds of fears and anxieties can become crippling, and ironically can create a self-fulfilling prophecy of failure and undermining confidence and impacting the ability to take action and perform effectively.”
Criticisms and negative opinions are likely to sting more if someone believes their success was influenced more by luck than merit, Cilona said.
However, it’s important to note that different people would handle the situation in different ways.
“The degree to which someone may be affected by having their competency and talent questioned typically relates to their own confidence level and what they believe about their abilities and success,” Cilona said.
“Those who have genuine self-confidence and belief in their talent and competence will not be as impacted (positively or negatively) by external validation or criticism,” he added.
What should be reassuring for Paulson is 90% of his investors (in two of his funds — not Advantage or Advantage Plus. We’re still waiting on those redemption numbers.) still believe in him. Only 10% of his hedge fund’s clients redeemed their money from Paulson’s $15 billion Credit Opportunity and Recovery funds at the end of September.