Paulson says he's staying the course on gold

Billionaire investor John Paulson told investors he is staying the course on gold even though there may be some more short term volatility. John Reade, partner at Paulson & Co, said that the firm is not veering off its course even as he cautioned that there could be more price fluctuations in the short term.

By Svea Herbst-Bayliss
Wed Apr 24, 2013 2:43pm EDT
Reuters

(Reuters) - Billionaire investor John Paulson told investors on Wednesday he is staying the course on gold even though there may be more short-term volatility in the price of the metal.

The New York-based hedge fund manager has long stuck by his thesis that gold will someday be a powerful hedge against inflation, and it was no different on the investor call he held, two people who listened to the call said.

John Reade, a partner at Paulson & Co, said that the firm, which oversees about $18 billion, is not veering off its course even as he cautioned that there could be more price fluctuations in the short term.

A spokesman for Paulson did not immediately return a call seeking comment.

Paulson held the firm's regularly scheduled quarterly call to speak in more detail about the first quarter, when the bulk of his funds delivered positive returns. That marked an improvement from 2012 and 2011, when his best-known portfolios, the Advantage Funds, chalked up double-digit losses each year, with the Advantage Plus fund losing more than 50 percent in 2011.

Paulson had released his quarterly letter to investors, which included results, three weeks ago. On Wednesday, clients had a chance to ask questions.

Since the end of the first quarter, gold prices have dropped dramatically, raising concerns about Paulson's performance and how he might react to it. However, recent demand for physical gold has been seen as a steadying force and the price has recovered some.

Paulson's small gold-oriented fund, which was already down 28 percent in the first quarter, lost more money recently. But Paulson said the bulk of assets belong to Paulson himself, which makes any sort of investor run on the fund highly unlikely.

Paulson's Recovery Fund delivered some of the best returns in the industry, with a 14 percent return during the first quarter. Also, news on mergers has recently been positive for the firm.

The investor became one of the most closely watched fund managers after he earned billions in 2007 by betting against the overheated housing market.

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