Paulson & Co. sees small investor withdrawals in June

Date: Thursday, July 15, 2010
Author: Alistair Barr, MarketWatch

Hedge fund giant's returns suffered in June as markets swooned, AR reports

Paulson & Co., one of the world's largest hedge fund firms, got a little smaller in June. That was likely driven by investment losses rather than big redemptions by investors.

Paulson's Advantage fund lost more than 4% last month, while the Paulson Advantage Plus fund, which adds a small layer of leverage to the same strategy, lost almost 7%, according to industry publication AR magazine.

Paulson's Recovery fund, which invests in financial-services companies that need new capital, slumped more than 12% in June. Paulson International, an event-arbitrage fund, lost 3.3%, while the firm's Gold fund climbed more than 7%, AR reported.

Paulson's assets under management dropped to $30.9 billion as of July 1 from $33.1 billion earlier in the year, AR noted.

Investment losses last month likely knocked more than $1.5 billion off assets. That suggests investors withdrew roughly $500 million from Paulson funds.

In April, the Securities and Exchange Commission sued Goldman Sachs Group Inc. /quotes/comstock/13*!gs/quotes/nls/gs (GS 139.82, +0.76, +0.55%) , alleging the investment bank didn't tell investors in a collateralized debt obligation that Paulson & Co. helped pick some of the underlying assets in the vehicle and was betting against it.

Paulson wasn't charged by the SEC and the firm has said it did nothing wrong. But its involvement in the suit sparked concern that some investors could redeem.

Some hedge funds let investors redeem each quarter, with 45 days notice. The SEC's suit against Goldman was filed in the middle of April, so June 30 may have been the first time Paulson investors could have got their money back after the complaint emerged.

During a conference call with investors soon after the suit, Paulson said it wasn't seeing big redemption requests. Read about Paulson's response to the SEC complaint.

However, that was before the firm's performance was dented by a market swoon that started in May.