http://dealbreaker.com/2012/10/paulson-and-co-investor-finds-new-and-interesting-way-to-kick-john-paulson-when-hes-down/
( Recall Harbinger Capital ? Went from 26 billion in assets under management in 2008 to 3 billion presently - mainly in troubled Light Squared investment... Paulson's assets under management have been cut in half since early 2011 and we haven't seen what the level of redemptions will be as that deadline is the end of October..... )
Paulson and Co Investor Finds New And Interesting Way To Kick John Paulson When He’s Down
By Bess Levin
As Paulson and Co employees, clients, and people named John Paulson do not need to be told, the past year and half has not been the most joyous of times for the hedge fund giant. After making billions shorting subprime mortgages, the firm ended 2011 down 55 percent, was down 16 percent through the first half of 2012, and as of July saw assets under management decline 44.9 percent to $21 billion from $38.1 billion, due to a combination of unfortunate performance and redemptions by investors so angry at the fund that they’ve felt the need to repeatedly tell anyone who will listen that parting ways with P&C was among the best if not the best decision they’ve ever made. One investor that hasn’t had to consider voicing its unhappiness to the press or even worry about losing money at all? The 92nd Street Y. Last November Paulson guaranteed that he would personally cover their losses, whatever they turned out to be, come year-end. And the generosity did not stop there: for this one investor only, Paulson offered his services pro-bono, waiving all fees. So while he probably didn’t expect representatives of the Y to rent a skywriting plane to proclaim their love and appreciation for him over midtown, lobby the city of New York to get 92nd renamed Paulson Street, or have his face tattooed to their chests, he probably also figured they wouldn’t turn around and hit him the mother of all slaps in the face.
In this case the declaration that despite the highly favorable terms of their arrangement, any involvement with P&C still felt a tad too risky for everyone’s comfort level.
In the midst of the financial crisis, the 92nd Street Y came up with a sweetheart deal for its endowment: investments in funds run by the likes of John Paulson, Marc Lasry, and other hedge-fund luminaries that were fee-free and guaranteed against losses. The strategy performed well for several years, said people familiar with how it worked, as the Y benefited from risk-free investing in some of the fund industry’s most successful strategies. But, concerned about the impact of a catastrophe in which a money manager couldn’t repay losses and eager to construct a more diversified portfolio, the Y recently opted to redeem its hedge-fund investments, these people said, and rebuild its financial strategy from scratch.
Paulson himself is worth $12.3 billion, so a catastrophe in which he couldn’t repay the Y’s losses would have to be a big one. And don’t give him some line about how you’re pulling out of all hedge fund investments and it’s not personal. You could have let him have this.
http://finance.yahoo.com/news/paulson-fund-losses-prompt-investors-180021472.html
Paulson Fund Losses Prompt Some Investors to Pull Out
By Kate Kelly | CNBC – 7 hours ago
@cnbc on Twitter
Last January, when investors in one of Paulson & Co.'s best-known hedge funds saw the value of their investments had been slashed in half, some wondered how much worse it could get.
Hedge fund manager John Paulson.Then by Sept. 30, there was an additional drop of 15 percentage points-with three months left to go in the year.
As a result, some Paulson investors-who gave the firm a passlast year when the riskier version of the firm's umbrella fund, Paulson Advantage Plus, saw enormous losses-are now throwing in the towel.
Fed up with lagging returns at the hedge-fund management company, a number of investors large and small are opting to either reduce their capital at risk or yank it entirely by year's end.
It's the latest blow to fund manager John Paulson, who became famous in the investing world after he bet correctly on the collapse of housing prices in 2008.
"We expected, based on the way [Paulson] does things, that we're going to have periods of time where he's out of favor," said Craig Husting, the chief investment officer of the Public School and Education Employee Retirement Systems of Missouri, a pair of pension funds that have trimmed their investments in Paulson's Advantage Plus to a third of the original size over the past year and a half. "But just the beta - the volatility of his bets - is why we pared back."
With just days to go before an Oct. 31 deadline for investors who want to redeem their capital to notify Paulson, Husting may well be joined by a panoply of others.
They range from the private bank of of Citigroup (C), which revealed in August that it would claw back its funds (a process starting in 2013), to the 92nd Street Y, which people familiar with the matter said pulled its capital this year because of concerns about future potential losses and its investment mix.
Other significant players, including the brokerage arm of Morgan Stanley (MS), are considering pulling funds, but haven't yet made a final decision, people familiar with the matter said. (A spokeswoman for the 92nd Street Y didn't return calls for comment, and a Morgan Stanley spokesman declined to comment.)
Paulson, which is known for its aggressive, 25-person investor-relations team, isn't taking the reversals lying down.
"Recent performance in our Advantage Fund is disappointing and we understand investor frustration," said the firm in a written statement.
The firm noted that over the lifetime of the Advantage Funds, which were opened in 2004, Paulson had "far exceeded" both the event-driven hedge fund index and the Standard & Poor's 500-stock index (^GSPC), returning more than 10 percent annually.
It also noted that the vast majority of its current Advantage fund participants - 89 percent - have invested in it using gold as a currency, rather than dollars, an option Paulson offers to all its investors. In gold-share terms, the Advantage fund is flat for the year, the firm added, not down.
During the past year, Paulson has worked to appease worried investors.
Last winter, the company invited unhappy Advantage fund participants to move their capital into other Paulson funds while preserving their high-water marks. That meant that the former Advantage investors had the chance to participate in 100 percent of their new funds' profits, rather than the standard 80 percent, with the remaining 20 percent reverting back to Paulson management.
At the same time, Paulson set up a new risk-management structure that gathered for biweekly meetings and set new trading and leverage limits.
Ironically, though, it was some of the resultant hedges against a further credit crisis in Europe, as well as battered performances in Paulson's gold-miner portfolio, that have given the firm's Advantage funds trouble since.
Through Sept. 30, people familiar with the matter said, the Advantage Plus fund has fallen 15 percent, meaning that a dollar invested in it on Jan. 1, 2011, would be worth about 41 cents today. In the Advantage fund, the drop was roughly 10 percent, meaning that that dollar would be worth 57 cents today.
That fall has been equally pronounced in the firm's total assets under management.
Once $38 billion, the figure has fallen to nearly half that since early 2011, and now sits at nearly $20 billion, people familiar with the matter said.
Of that, about $12 billion belongs to John Paulson and his employees, creating what the firm described in its statement as "a very sticky capital base."
The firm also points out that on a capital-weighted basis, its funds are up an average of 2 percent this year.
Heartened by Paulson's tremendous wins during the recession and hoping 2011 was a one-off, many investors hung tight over the past year.
But an August announcement that Citigroup would remove Paulson from its internal hedge-fund platform, which initiated a $410 million redemption process, crystallized the doubts among some of the fund company's more patient investors.
"In my 20-plus years, I have never seen someone go from so high to so low in such a time period," said Brad Alford, who runs the Atlanta investment firm Alpha Capital Management and had originally invested about $10 million of his high net worth clients' money in Paulson. That figure, Alford estimated, is now closer to $3 million.
His frustration with Paulson is such that he's pulling out of a broader fund-of-funds platform entirely just to remove his capital from Paulson - even though the platform contains other funds he likes, such as DE Shaw's Oculus Fund, which is up by double digits so far this year.
"You just get so frustrated that you are done with the name, you are done with the manager, he's done something you can never go back from," Alford added. He's had better luck with mutual funds that employ hedge fund-type strategies with much more liquidity and a fraction of the fees, he said.
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