A Bloomberg article this morning suggests Paulson’s $32 billion hedge fund, Paulson & Co, might be too big to succeed.
The two side of the “is Paulson’s AUM too big now” debate fall along the lines of who is and isn’t invested with him.
From those are invested with him:
Paulson continues to market his funds because he sees opportunities in the next 18 months to 24 months as companies restructure their debt – Charles Krusen, head of Krusen Capital and a Paulson investor.
“We think they’ll be able to [reach his target returns of 12% – 15% in the Advantage fund].” – Charles Krusen
Another from people who aren’t invested with him:
“There’s no doubt that Paulson is a big draw for investors at the moment. As with all managers that bulk up, there’s always the risk of returns becoming mediocre.” – Richard Tomlinson, founder of Tomlinson Investment Consulting, which advises clients on hedge funds.
“There is a point where you can be too big to generate returns. Being large and able to build a strong infrastructure are good things, but in general I think the pendulum has swung too far.” – Lawrence P. Chiarello, a partner at SkyView Investment Advisors LLC, which selects hedge funds for clients.
Maybe he’s just not taking their phone calls.
But really, the only thing that matters here are the numbers. Is Paulson losing money? No.
He was branded “mediocre” in late December when this Advantage fund was returning ~15% and his peers were returning ~17%.
Another thing worth pointing out: Paulson has closed his credit and merger-arbitrage funds before when he was concerned their size might hinder performance.