The 59-year-old manager’s Advantage Plus Fund fell 36 percent last year after a 3.1 percent loss in December, two people with knowledge of the returns said. The event-driven fund, which uses leverage to make bets on companies undergoing change including spinoffs, mergers and bankruptcies, lost money last month on energy holdings and post-reorganization stocks, said the people, who asked not to be identified because the information is private.
Paulson & Co., which oversees $19 billion, has experienced big wins and losses in the past few years because of concentrated bets on mortgages, mergers, gold and the European debt crisis. After starting his fund to profit on corporate takeovers in 1994, he made $15 billion in 2007 by wagering against the U.S. housing market. The firm has shrunk from a peak of $38 billion in 2011 after losing 51 percent that year in the Advantage Plus fund.
Armel Leslie, a spokesman for New York-based Paulson & Co. with Peppercomm, declined to comment on the returns.
The Advantage fund, which employs a similar strategy without leverage, slumped 2.4 percent in December and 29 percent in 2014, the people said. Unrestricted shares of the Advantage and Advantage Plus funds, which can buy newly-issued securities and were invested in Alibaba Group Holding Ltd. (BABA), fell 19 percent and 24 percent respectively last year, one of the people said. The event funds had $2.8 billion in assets as of Dec. 1.
Merger Strategies
The firm’s Paulson Partners fund, which invests in companies undergoing mergers, ended the year up 0.8 percent after falling 0.3 percent in December, one of the people said. The merger-arbitrage funds, which comprise about half of firmwide assets, were hurt by Shire Plc plummeting in October after agreeing to terminate a merger with AbbVie Inc. Paulson Partners Enhanced, a version of the fund that employs leverage to amplify returns, fell 0.7 percent in 2014 after declining 1.6 percent last month.
Paulson’s Credit Opportunities Fund slumped 2.3 percent in December and 4.5 percent during the year after losses in energy-related securities, bank debt and defaulted assets, the person said. The hedge fund firm anticipates opportunities in energy after oil prices plunged and in European restructurings, according to a letter accompanying the returns, said the person.
