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September 10, 2007
Paulson Credit Fund rises fivefold on subprime bets
Paulson & Co.'s biggest credit hedge fund rose fivefold in 2007 after the New York-based investment firm with $20 billion in assets under management bet U.S. subprime-mortgage defaults would soar.
The $4.5 billion Credit Opportunities fund, started last year, gained 26.7 percent in August, according to a Paulson investor. Credit Opportunities II, a newer $2.3 billion fund, is up more than threefold after a 32 percent return last month. The firm, founded by John Paulson in 1994, more than doubled its assets since the start of the year.
U.S. home-loan foreclosures rose to a record 0.65 percent in the second quarter, according to the Mortgage Bankers Association in Washington. U.S. asset-backed debt including some mortgage-backed bonds fell 3.5 percent last month following a 1.2 percent drop in July, the two largest declines in at least 13 years, according to Merrill Lynch & Co.'s broadest index that includes bonds linked to subprime or second mortgages.
``These guys made a big bet at the right time, and they're being rewarded for it,'' said David Nelson, chief executive officer of Greenwich, Connecticut-based DC Nelson Asset Management LLC, which isn't invested in the Paulson funds.
Hedge funds run by Goldman Sachs Group Inc., Tudor Investment Corp and D.E. Shaw & Co. declined amid widening credit spreads and stock-market volatility. Losses in subprime- related holdings forced managers including New York-based Bear Stearns Cos. to close funds.
SAC Capital
SAC Capital Advisors LLC, the Stamford, Connecticut-based hedge-fund firm run by Steven Cohen, raised $1 billion from investors last month as its biggest fund fell 3 percent. The $8 billion SAC Capital International Fund finished August up 10 percent for the year, according to an investor who declined to be identified.
In August, Paulson increased 5.2 percent in its event- driven fund that invests in debt of distressed companies, extending that fund's 2007 advance to 69 percent.
A spokesman for John Paulson declined to comment.
Before starting his hedge-fund firm, Paulson, 51, was general partner at New York-based investment firm Gruss Partners. He was a managing director at Bear Stearns from 1984 to 1988 after earning a master's degree from Harvard Business School in Boston.
Managers had their second-best fund-raising quarter from April to June, attracting $58.7 billion globally from investors, according to industry tracker Hedge Fund Research Inc. of Chicago. Hedge funds oversee more than $1.7 trillion, almost triple the amount five years ago.
-Bloomberg.com-
Posted by su at September 10, 2007 11:42 AM