There's A Term For Why 90% Of John Paulson's Investors Are Sticking With Him

John Paulson

Only 10% of his clients pulled their money from John Paulson‘s $15 billion Credit Opportunity and Recovery funds at the end of September.

Everyone’s watching redemptions in Paulson’s funds as the clock ticks closer to the October 31st deadline for Paulson investors to redeem from Advantage Plus, which is down 47% YTD, Advantage, which is down 28% through September, and the rest of Paulson’s funds.

Overwhelming redemptions coupled with poor returns both have been cited as a reason that some funds close.

Redemptions from Credit Opportunities, which is down around 18% YTD, and Recovery funds, which invests in cheap real estate in hopes of a recovery and is down around 31%, aren’t necessarily indicative of the redemption requests that Paulson’s other funds will or won’t see, but what investors in those funds are saying about Paulson is.

“We’re going to give Paulson the benefit of the doubt,” Trip Kuehne, founder of Double Eagle Capital Management LP, a Dallas-based firm that has invested with Paulson since 2005, told Bloomberg. “I believe in him and his firm and don’t plan to pull my money.”

Investors in the rest of Paulson’s funds might feel the same way, too, and a fund of funds investor tells us that there’s a term for why investors will stick with Paulson.

It’s called positive equity.

Paulson has a lot of it with his investors because he’s made a lot of people a lot of money in the past. Investors who have been in the Advantage Plus fund since its 2005 inception are still up 268% over the life of the fund, clients who came in at the beginning of 2008 have made 4.3%, according to Bloomberg calculations.

Paulson is down a LOT this year, but he’s been up much more. He still has a lot of positive equity left over. 

Don’t miss: Will John Paulson shut Advantage?

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