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John Paulson launches health-care fund

Hedge-fund manager John Paulson
David A. Grogan | CNBC

Billionaire investor John Paulson is looking to make more money on health care.

Hedge fund firm Paulson & Co. is launching the Paulson Long/Short Fund to initially focus on health care, pharmaceutical, and related technology and consumer sector investments, according to a letter sent to clients obtained by The firm, which runs approximately $20 billion overall, is seeding the fund with $500 million.

Guy Levy, Paulson's health-care expert, will be portfolio manager of the new fund, according to the communication.

"Guy's talent and expertise in health care, pharmaceutical and related sector investing have added significantly to our performance over the past five years, giving me confidence in his abilities to lead this new fund," John Paulson wrote in the letter.

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A spokesman for Paulson declined to comment.

Paulson's largest holding as of March 31 was biopharmaceutical company Shire, whose stock crashed in October on a failed deal with AbbVie and burned Paulson and other hedge funds. Shire shares, however, have rebounded this year to near their value before the merger collapsed.

Recent health-care successes for Paulson include Allergan, which Actavis announced it would buy in November; Salix Pharmaceuticals, which was purchased by Valeant; and Mallinckrodt, which bought Ikaria.

Five of Paulson's top stock holdings as of a March 31 filing were health-care related: Shire, Actavis, Mallinckrodt, Salix and Mylan.

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The same letter also announced two major promotions.

Longtime Paulson investment staffers Sheru Chowdhry and Ty Wallach will become co-portfolio managers of the Paulson Credit Opportunities Fund, with Sheru sharing trading authority with Paulson himself.

"This is a reflection of Sheru's deep credit expertise, experience and performance over the past 12 years and Ty's success leading numerous successful credit investments," Paulson wrote.

"These changes," Paulson added, "will allow me to continue to focus on event investing, provide opportunity for growth internally and maximize the potential to grow our capital at above-average rates of return over the long term."

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Paulson is having a good year after losing money in many funds over 2014.

Funds that bet on company mergers, the firm's core strategy at $11.5 billion in capital, are up: the Partners fund gained 9 percent net of fees through May and the Enhanced fund is up 19 percent, according to a person familiar with the situation. The credit fund also gained 4 percent over the same period.