Bank of America (BAC) hosted a much-anticipated conference call with famed investor John Paulson on Tuesday to address his hedge fund’s alarmingly poor performance in recent years. While the call was described by participants as cordial, many had expected a more heated conversation given that Paulson’s two flagship funds have been significantly underperforming against the broader market.
Paulson’s managed assets have twindled from a peak of $38 billion to just south of $20 billion this year. In 2011, the Paulson Advantage fund was down 36 percent while the Paulson Advantage Plus was down 52 percent. The funds have lost 13 percent and 18 percent, respectively, this year, according to WSJ. Despite his struggles, Paulson is still regarded as one of the most prominent money managers on Wall Street due to his phenomenal success during the market crash in 2007.
A large portion of the funds’ struggles have been attributed to his excessive bullishness on gold. Paulson is the largest holder of the SPDR Gold Shares (GLD) with 22 million shares, and has positions in several gold miners including Allied Nevada Gold (ANV), Anglogold Ashanti (AU), and Barrick Gold (ABX).
Last week, Citigroup (C) announced that it would no longer invest with Paulson, withdrawing $410 million in assets. Morgan Stanley (MS) has also put Paulson’s fund on watch, restricting new investments into the fund. Bank of America, however, seemed to be confident that Paulson will be able to right the ship, and even offered praise at times during the call.
Going forward, the hedge fund manager still appears bullish on gold’s prospects, as well as the growth opportunities in casino stocks like Caesars Entertainment (CZR) and MGM Resorts International (MGM) as a play on Macau.