Paulson's Advantage Funds beat peers with gains in August

BOSTON, Sept 13 Sat Sep 14, 2013 2:54am IST

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BOSTON, Sept 13 (Reuters) - Billionaire investor John Paulson's biggest funds are boasting double-digit returns for the year, and his Advantage Funds made money in August when many hedge funds were in the red.

The Advantage Fund rose 1.9 percent in August and is now up 10 percent for the year, while the Advantage Plus Fund rose 2.8 percent and is up 14.4 percent, according to two people familiar with the numbers but who are not permitted to speak about them publicly.

Both portfolios beat the average return of hedge funds, which slipped 0.73 percent in August, as well as the Standard & Poor's Index, which fell 3.3 percent. The gains were welcome news for the fund family after two years of heavy losses shrunk the once enormous size of the Advantage Funds.

Gains in gold mining stocks, energy and healthcare helped fuel the Advantage Funds' returns in August.

Paulson, whose moves have been closely watched ever since he earned billions by betting against subprime mortgages, also earned bragging rights for his other funds. The Paulson Recovery Fund is up 32.3 percent for the year after slipping 1 percent in August, while the Paulson Credit Fund is up 13.6 percent for the year and the Enhanced Fund is up 21.8 percent.

The average hedge fund is up nearly 4 percent since January, according to Hedge Fund Research.

Even Paulson's Gold fund, which made dramatic headlines with heavy losses earlier in the year, gained 11 percent in August, when the price of gold rose 6 percent, one of the people who had seen the numbers said.

The Gold fund never attracted many outsiders and is now largely made up of Paulson's personal money.

Paulson, known for his patient investing style, has held firm this year to his thesis that gold will come back, and gold miners will flourish, especially as growth picks up around the world.

This week Paulson's investment in Canadian mining company Gabriel Resources came under scrutiny after Romanian Prime Minister Victor Ponta said legislators were set to reject Gabriel's 14-year bid to build an open-cast gold mine. With the project in jeopardy, Gabriel's stock price dropped 37 percent in five days.

Paulson is Gabriel's biggest shareholder with a 16 percent stake, but a person familiar with the firm said that for the $18 billion firm the investment is small and unlikely to have a very large impact on overall returns.

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