John Paulson’s hedge fund group, the Paulson Funds, had another strong, if not spectacular quarter, according to an investment letter obtained by CNBC.
The giant hedge fund manager, who oversees $29.5 billion in assets, failed to keep pace with the S&P during the quarter in his largest fund, event arbitrage, but is still putting up strong year to date returns.
Paulson posted his biggest quarterly gains in his credit funds, which are now up 22.6% net year to date. The credit fund, with $7.5 billion in assets, expects its greatest returns from the defaulted debt category, says the letter. Paulson points out that his credit fund is still relatively small when compared with other distressed hedge fund managers.
Paulson’s largest single fund in event arbitrage has taken its gross exposure up to its highest level this year. The fund began the year at 61% gross exposure, but is now 169% weighted towards long positions. The funds largest position in financials continues to be Bank of America , which it believes has upside from here based on projection into 2012 when the bank will have passed through its current write down cycle. Gold is also a significant holding for the fund with five gold mining stocks comprising 14% of the portfolio, according to the letter.
Paulson eeked out small gain in its $4 billion merger arbitrage fund, which is now open to new investors. Its best position during the quarter was playing the spread in Pfizer’s now completed deal to acquire Wyeth.
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