Paulson soothes nervy investors on BofA conference call

Wed Aug 29, 2012 7:03am IST

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Aug 28 (Reuters) - Hedge fund manager John Paulson, whose biggest funds are posting double digit losses for the second year in a row, reiterated in a conference call on Tuesday that his bets on gold will pay off while also acknowledging that current returns are disappointing, two people who listened to the call said.

Paulson, one of the industry's biggest managers with roughly $20 billion under management, spoke on a conference call with Bank of America financial advisors and their wealthy clients late on Tuesday. The call, which had been scheduled for some time, gave investors a chance to speak directly with Paulson who has notched some of the industry's biggest gains as well as some hefty losses.

As Paulson's biggest funds -- the Advantage and Advantage Plus portfolios -- are off again this year after having lost 36 percent and 50 percent respectively in 2011, some big investors have expressed concern about Paulson's abilities. Last week Citigroup's private bank announced plans to stop investing with him, dealing a blow to Paulson & Co, which has long been a favorite with wealth managers and pension funds alike.

But Bank of America, which hosted Tuesday's call, gave the manager a big vote of confidence and there have been no indications that other big private wealth managers like UBS are likely to have a change of heart about recommending the 56-year old manager.

Bank of America declined to comment on details of the call.

While Paulson expressed disappointment with Citi's decision, Bank of America's private bankers said they are sticking with him. Spencer Boggess, chief investment officer for alternative investments hosted the call and praised Paulson's long record of strong returns, and the firm's strong research abilities, particularly its work on gold.

Paulson has long been bullish on gold as well as gold miners and discussed them on the call, noting that his portfolios are structured not to depend on specific economic conditions in order to flourish.

Paulson said that redemption notices, where clients formally ask for their money back, have been running at historical averages so far this year.

Citi's divestment will withdraw some $410 million from Paulson's assets under management, which peaked at $36 billion in 2011.

Paulson shot to fame in 2007 when his long-term bets against subprime mortgages paid off, earning investors in his Advantage Plus fund a 163 percent return and himself the industry's biggest-ever payday of $5 billion.

But two years later when he began betting that the U.S. economy would rebound, his timing appeared to be off. At the end of last year, after Bank of America's falling stock price had dealt a heavy blow to his portfolios, Paulson called it quits and sold out. He missed a rebound in the sector early in 2012.

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