Even the best investors don't always win. Billionaire hedge fund manager John Paulson has learned that lesson this year. After an unprecedented run of riches when he banked about $20 billion - first betting against the housing market and then flipping the trade and turning bullish on the economy and the banks - one of Paulson's largest funds is down nearly 20% this year, according to Gregory Zuckerman, senior writer with the Wall Street Journal and author of The Greatest Trade Ever.
Zuckerman joined The Daily Ticker's Aaron Task on set this week to discuss Paulson's recent troubles.
Zuckerman says Paulson's success may also be contributing to his poor performance. Thanks to his phenomenal gains Paulson's firm now manages $38 billion in assets. That's a great fee making machine but it does make investing more difficult. "He went wrong by managing so much money," Zuckerman explains. "Historically the best investors - Julian Robertson George Soros - didn't do very well when they go that big."
They Can't All be Winners
He's also made some poor investments. Paulson originally bought Bank of America in 2009, near the bottom but has seemingly held on too long. Though he pared back his holdings, Bank of America's 28% slide this year has trimmed those gains. As may of us individual investors Zuckerman says Paulson simply held on to a winner "too long."
Paulson's more dramatic loss this year came from a bet on Chinese forestry company Sino-Forest. An accounting scandal with that firm caused the stock to plunge more than 80% last month and took $500 million in Paulson's money with it. "He didn't have the sophistication and the experience," in China to know better, says Zuckerman. Paulson admitted to his blunder on a recent conference call with investors and promised to beef up his research in that part of the world.
Even the best aren't perfect.
- John Paulson
- Julian Robertson George Soros
- Bank of America
- the Wall Street Journal