Leave Paulson alone!

By Rob Copeland

Wed Jan 23, 2013

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Beleaguered manager about as relevant as Ebbets Field.


  
  Britney's shaved head and Paulson's shaved returns: Haven't they suffered enough?

By Rob Copeland

A celebrity cause du jour for the past year has been to combat bullying, defined as unwanted, aggressive behavior that involves a real or perceived power imbalance. "The behavior is repeated, or has the potential to be repeated, over time," the federal government states.

It's time the hedge fund industry takes a stand for one of its own who has been persecuted and attacked far beyond his proportionate importance. He is the scrawniest kid on the playground, hooked to a tetherball pole, swinging 'round and 'round until his Coke bottle bifocals fall off. We should probably invoke the mercy rule. Once and for all, altogether now: Leave John Paulson alone!

Back in the days of The Greatest Trade Ever, Paulson deserved the attention. Even in 2011 midway through what might charitably be called The Greatest Fall From Grace Ever, he was undoubtedly interesting. By now, though, the punch lines have grown stale, and we are approaching Britney-shaving-her head territory. To keep staring would be cruel.

We are right about at the point when Joaquin Phoenix grew a Messianic beard and appeared so stoned on late night television it pushed some to question whether he was in on the joke.

Paulson does not appear to be laughing. He's the Heidi Montag of the hedge fund industry: A man dramatically disfigured (returns-wise anyway--the year-round tan and Mediterranean complexion have never looked better) yet apparently unaware of how different he is from everyone else in the room. He's still smiling for photo shoots with major magazines and taking shots at regulators. Meanwhile last year as the median Americas event-driven hedge fund rose 10.38%, according to the Absolute Return benchmark, Paulson's Advantage Plus strategy casually dropped 21.41%. And that a huge improvement from the year before! (See full returns here).

What kind of sick, demented, sadist would keep paying attention? The least we can do is let the man rest in peace. Those who have trusted him with their money appear to be doing just that: the firm is down to roughly $17 billion in assets, from $36 billion just two years ago.

While those investors are fleeing the scene of the crimei, the rubber-necking by the national press has continued unabated. Every month, otherwise sober-minded reporters at wire services and newspapers trip over themselves to be the first to describe his latest loss (and with eight negative months out of the past twelve for his Advantage funds, there's been plenty of opportunity to go around). When was the last time you read a standalone performance story on Baupost Group's returns, or one of the giant J.P. Morgan Asset Management funds, or Angelo, Gordon & Co.?

All of those firms manage significantly more money overall, let alone for external investors (the multi-multi-billionaire Paulson has said the vast majority of his fortune is invested in his own funds, giving himself a potential majority of the LP). Yet his competitors manage to slip by with relatively scant notice.

Like most dying stars, John Paulson was barely a factor in the galaxy before falling his way into a black hole. Unfortunately, black holes are said to be able to theoretically survive longer than the age of the universe. If he's going to bleed out for that long, the least we can do is be decent and avert our eyes.

Rob Copeland is an Absolute Return staff writer. He can reached at rcopeland@absolutereturn.net


i Paulson has not been accused of any crimes. That a $10 million investment in his Advantage Plus fund at the start of 2011 would be worth $3.73 million today is absolutely, by all indications, wholly legal, and not a violation of federal statute 18 U.S.C. 333.