Wall Street Journal
Hedge-fund manager John Paulson apologized to his investors, saying performance at his funds this year is "the worst in the firm’s 17-year history." John Paulson, president and co-fund manager of Paulson & Co. Inc.
In his third-quarter letter dated Oct. 28 to investors, Mr. Paulson, who won fame for reaping billions of dollars by betting against the U.S. housing market, said "we are disappointed and apologize." Two of Paulson & Co.’s largest funds—Advantage Fund and Advantage Plus Fund—posted declines of 29% and 44% this year through October, according to a person familiar with the funds. Mr. Paulson said performance of funds were affected by the European sovereign-debt crisis, slowing economic growth and disagreement over the debt ceiling in the U.S.
"As the year progressed our assumptions proved overly optimistic and net equity exposure too great," he said in the letter, which was seen by a person close to the funds. At this rate, Mr. Paulson and his staff aren’t likely to earn incentive fees or a cut of profits. "We have learned from the 2011 experience," Mr. Paulson said, adding that the firm is "committed to returning investors to high-water marks." In the letter, Mr. Paulson said he has added Harvard economics professor Martin Feldstein to the firm’s advisory board, joining former Federal Reserve Chairman Alan Greenspan, New York University’s Stern School of Business finance professor Edward Altman and economic forecaster Christopher Thornberg.