Hedge fund manager John Paulson to invest $250m in new gold fund

Billionaire John Paulson

Hedge fund manager John Paulson plans to invest as much as $250m (£149m) of his $6bn personal fortune in a new gold fund he is in the process of establishing.

Mr Paulson, best known for making $3.7bn from bets on the collapse of the US sub-prime mortgage market, is believed to have told investors that the new fund, to be run by Paulson & Co, will invest not just in gold miners but also in other investments related to the precious metal.

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Although not Paulson & Co’s first foray into gold, given approximately 10pc of the $30bn it has under management is in gold-related investments, it would be the firm’s first pure-play gold fund.

No fund-raising cap is thought to have been set at the moment, but Mr Paulson’s personal commitment is considerable and is likely to be seen as a highly attractive draw by investors.

Hedge fund investors – known as limited partners in the trade – take a great deal of comfort from managers’ – known as general partners – co-investments.

Investors will inevitably question the timing of the new fund, coming at a point when gold is at an all-time high of close to $1,150 an ounce.

However, Mr Paulson is one of the most successful hedge fund managers in the US, and is known for his knack of buying assets at low prices.

As well as his sub-prime bet, he has made considerable amounts of money from betting on the financial industry and also has a recently established distressed investment fund.

Just last week, it was disclosed that Paulson & Co had taken a $1.45bn bet on Citigroup’s eventual recovery, after buying 300m shares in the banking conglomerate in the three months to the end of September.

At the same time, it sold its entire $328m investment in Goldman Sachs, and reduced some of the $2.2bn stake it took in Bank of America’s shares earlier in the year, a stake in which “considerable upside remains,” according to a recent letter Mr Paulson sent to investors.

A spokesman for Paulson & Co declined to comment on the fund.

By James Quinn, US Business Editor
Published: 8:40PM GMT 18 Nov 2009

Source: The Telegraph

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