Pulling Up the Rear: Paulson’s Advantage Fund

by Todd Shriber

It’s a good thing hedge fund legend John Paulson invited investors in his firm’s flagship Advantage Plus Fund to Las Vegas last month because the fund isn’t off to a stellar start in 2011. Not to be trite, but with a little bit of luck, investors could have done better in Vegas than the 0.1% return offered by the Advantage Plus last month.

Advantage Plus, which holds $9 billion in assets, isn’t exactly setting the world on fire in 2011. Designed to take advantage of corporate events such as bankruptcies and takeovers, the fund is off 1.7% thus far this year, Bloomberg reported.

To be fair, Paulson is having better luck with some of his other funds. The gold-denominated shares of Advantage Plus were up 6.3% last month and are up 4.9% for the year, Bloomberg said, and Paulson’s credit strategies have been winning bets in 2011. His $9 billion Credit Opportunities Fund was up 1.4% in April and is higher by 7.8% on the year, according to the Financial Times.

Still, the tiny gain for Advantage Plus in April was far worse than the tepid returns sported by a pair of hedge fund indexes. The Bloomberg Aggregate Hedge Fund Index added 1.4% last month, and the Hennessee Hedge Fund Index was up 1.3%, according to FINalternatives.

With the Kentucky Derby scheduled for this weekend, a racing analogy might be in order. Paulson has shown he is like a thoroughbred that likes to come from the back to win the race. Some of his funds got off to sluggish starts last year, sporting double-digit deficits as late as September. But Advantage soared 12.5% that month and 14% in December, to ensure a 17% return for the year, FINalternatives reported.

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