Paulson Licks Wounds, Still Bullish on Certain MBS Plays
No one is questioning that hedge fund giant John Paulson had a rough 2011 -- even Paulson himself.
So what's he playing heading into 2012? According to Bloomberg, he's taking just about the opposite stance of what created most of his wealth.
Paulson is holding a bullish position in residential and commercial mortgage securities. The position gave Paulson a 1 percent gain in the last quarter for his Credit Opportunities fund, reducing the loss there to 18 percent for 2011.
He's not alone either. As cited in the Bloomberg piece, one analyst from SkyBridge Capital said investors could make a lot of money in the commercial MBS market without significant change in the economic landscape.
As a reminder, Paulson made $15 billion in 2007 betting against the subprime housing market. His other notable plays include gold, which saw some year-end weakness in 2011, and financials, which suffered at the hands of European sovereign debt.
Since late-2008, Paulson has been buying bits and pieces of top-rated residential debt, and commercial-mortgage bonds in 2009. As of the third quarter 2011, Paulson's credit funds owned $2.4 billion of mortgage-backed securities on a "notional" basis, meaning the face value of bonds or bets in derivative markets.
Paulson's levered Advantage Plus fund ended 2011 down 51 percent, while his standard Advantage Fund dropped 36 percent. The funds ended 2010 up 17 percent and 11 percent, respectively.
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So what's he playing heading into 2012? According to Bloomberg, he's taking just about the opposite stance of what created most of his wealth.
Paulson is holding a bullish position in residential and commercial mortgage securities. The position gave Paulson a 1 percent gain in the last quarter for his Credit Opportunities fund, reducing the loss there to 18 percent for 2011.
He's not alone either. As cited in the Bloomberg piece, one analyst from SkyBridge Capital said investors could make a lot of money in the commercial MBS market without significant change in the economic landscape.
As a reminder, Paulson made $15 billion in 2007 betting against the subprime housing market. His other notable plays include gold, which saw some year-end weakness in 2011, and financials, which suffered at the hands of European sovereign debt.
Since late-2008, Paulson has been buying bits and pieces of top-rated residential debt, and commercial-mortgage bonds in 2009. As of the third quarter 2011, Paulson's credit funds owned $2.4 billion of mortgage-backed securities on a "notional" basis, meaning the face value of bonds or bets in derivative markets.
Paulson's levered Advantage Plus fund ended 2011 down 51 percent, while his standard Advantage Fund dropped 36 percent. The funds ended 2010 up 17 percent and 11 percent, respectively.
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