John Paulson Likes A Couple Of Money-Making Investments, Too

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They are useful for blunting the impact of drops in his most favorite thing in the whole world.

John Paulson, the hedge-fund manager trying to recover from more than two years of losses in some of his funds, told investors he likes convertible bonds, according to a person familiar with the matter.

Paulson, speaking on a conference call with clients today, also said mortgage-backed securities have been performing well within the New York-based firm’s Credit Opportunities Fund, according to a person who listened and asked not to be identified because the information isn’t public. The strategy is Paulson’s biggest, with $5.9 billion in assets, according to a letter to investors that was obtained by Bloomberg News….

Convertible bonds rose 7.9 percent in the first quarter and 9.9 percent last year, compared with returns for investment- grade corporate bonds of 1.5 percent this year and 10 percent in 2012, according to Bank of America Merrill Lynch data. The Standard & Poor’s 500 Index increased 11 percent, with reinvested dividends, in the first three months of 2013 and 16 percent last year.

Paulson’s Advantage fund, which employs a similar strategy as Advantage Plus and seeks to profit from corporate events such as takeovers and bankruptcies, climbed 3.4 percent in the first quarter. Had the fund not been invested in gold equities, it would have been up about 8 percent to 9 percent, Paulson is said to have told investors on the conference call. The fund would have gained 15 percent this year through yesterday without its investment in bullion miners, Paulson said, according to the person. Shares of gold producers comprised about 25 percent of the Advantage strategy as of last year.

Alas, Advantage is no longer doing even that well.

Hedge fund billionaire John Paulson's best-known fund is down 2.4 percent in April, largely due to the sharp selloff in gold, a source familiar with the numbers said on Thursday.

The Paulson & Co Advantage fund is making money for the year, but just barely, with a 1.3 percent gain, the source said.

Paulson Said to Tell Clients He Likes Convertible Bonds [Bloomberg]
Paulson's Advantage fund stung by plunge in gold [Reuters]

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