Jump to content

Paulson Having Another Tough Year


Parsad
 Share

Recommended Posts

Comment in the article "however, most hedge funds are underperforming the market this year".

 

Dont "most" hedge funds always underperform the market over time? 

 

and,

 

Isn't the above expecially true for customers in "most" hedge funds?

 

To Paulson, It looks a little like his macro calls are more wrong than right.  The problem with this is that after two years of being mostly wrong he is going to lose alot of his outside capital, making a come back that much harder.

 

 

Link to comment
Share on other sites

Guest rimm_never_sleeps

Anyone have his historical returns? I'm wondering if he's a legitimately great manager or a more pedestrian one who disproportionately benefited from THE BIG SHORT.....

 

benefiting from the great short makes him a great manager. he was one of the very few to not only see it coming but to make himself a billionaire because of it. cheers!

Link to comment
Share on other sites

middling? dude, i would like to see anybody here come close to those numbers managing a half decent portfolio.....picking random stocks in your portfolio doesn't count.....

 

I'll admit, I think he's overrated so my biases are clouding my judgement. Thankfully, that bias stopped me from buying sinoforest though! I shouldn't say "middling" but I wouldn't call him one of the greatest ever either.

 

In the Greatest Trade Ever, he didn't even come up with the idea. Someone came to him with it. Now, to his credit, he pounced on it.

 

With that being said, I took some time and did a quick excel spreadsheet. This is the arithmetic mean and not geometric mean so keep that in mind.

These results after after fees (Granted, Paulson would look a bit better with no fees - wouldn't everyone!)

 

From my calculations, the S&P 500 has average about 9.953684211% and Paulson's Advantagee is 11.12415789%. These are from 1994 to roughly YTD.

 

The roughly 10% return is the S&P 500 and roughly 11% is Paulson's Advantage (both of these numbers are close though probably not 100% accurate since I don't have his exact numbers available. A 1% excess return is good, but not amazing...especially if you add small cap exposure that Paulson probably has during that time.  After taxes, you would have probably done just as well, if not better, than with Paulson.

 

Link to comment
Share on other sites

After going through The Greatest Trade Ever, I don't think he's a very good investor. He got lucky and it's now starting to show. Several years of okay returns, a couple amazing years and now, a couple horrendous ones.

 

In my view, Paulson was a very solid investor in his "original" area of merger arbitrage.  He put up good, if not spectacular, results.  He was smart enough to take full advantage of the opportunity to short the various MBS deals, etc.  However from that AUM spiked incredibly and he changed his investment approach.  He no longer was doing merger arbitrage (impossible with the billions he now had to manager), he became a macro investor.  He simply is not able to do it, at least to the level he had performed at before.  He was like the 280 hitter with 25 homers and 85 rbi.  He all of a sudden puts up a 340 year with 40 homers and 130 rbi.  He gets the big contract and of course is not able to perform at that level.  It was an outlier. 

Link to comment
Share on other sites

Anyone have his historical returns? I'm wondering if he's a legitimately great manager or a more pedestrian one who disproportionately benefited from THE BIG SHORT.....

 

benefiting from the great short makes him a great manager. he was one of the very few to not only see it coming but to make himself a billionaire because of it. cheers!

 

To me that says "lucky" rather than great.

 

Kraven, I agree with your thoughts and analogy.

Link to comment
Share on other sites

Anyone have his historical returns? I'm wondering if he's a legitimately great manager or a more pedestrian one who disproportionately benefited from THE BIG SHORT.....

 

benefiting from the great short makes him a great manager. he was one of the very few to not only see it coming but to make himself a billionaire because of it. cheers!

 

To me that says "lucky" rather than great.

 

Kraven, I agree with your thoughts and analogy.

 

If I recall, he had a pretty good record prior to the "big short"..

Link to comment
Share on other sites

Anyone have his historical returns? I'm wondering if he's a legitimately great manager or a more pedestrian one who disproportionately benefited from THE BIG SHORT.....

 

benefiting from the great short makes him a great manager. he was one of the very few to not only see it coming but to make himself a billionaire because of it. cheers!

 

To me that says "lucky" rather than great.

 

Kraven, I agree with your thoughts and analogy.

 

If I recall, he had a pretty good record prior to the "big short"..

 

Right, it was good (admittedly, I was too hard with "middling"), but not extraordinary.

Link to comment
Share on other sites

Guest rimm_never_sleeps

Anyone have his historical returns? I'm wondering if he's a legitimately great manager or a more pedestrian one who disproportionately benefited from THE BIG SHORT.....

 

benefiting from the great short makes him a great manager. he was one of the very few to not only see it coming but to make himself a billionaire because of it. cheers!

 

To me that says "lucky" rather than great.

 

Kraven, I agree with your thoughts and analogy.

 

he became a billionaire because he thought of an idea and executed perfectly on it. i call that being "good". I call inheriting a billion being lucky. cheers! He also was a competent, successful money manager before striking gold. double cheers!

Link to comment
Share on other sites

Anyone have his historical returns? I'm wondering if he's a legitimately great manager or a more pedestrian one who disproportionately benefited from THE BIG SHORT.....

 

benefiting from the great short makes him a great manager. he was one of the very few to not only see it coming but to make himself a billionaire because of it. cheers!

 

To me that says "lucky" rather than great.

 

Kraven, I agree with your thoughts and analogy.

 

he became a billionaire because he thought of an idea and executed perfectly on it. i call that being "good". I call inheriting a billion being lucky. cheers! He also was a competent, successful money manager before striking gold. double cheers!

 

It's hard to disagree obviously about someone who became a billionaire doing anything.  We do seem to have different definitions though on what "good" means.  To me it entails a level of performance that is sustainable.  He is a bit of a one hit wonder.  Doesn't mean his other music wasn't good, but people weren't buying it.  I agree with what you said that he was a "competent, successful money manager".  If that is "good", I agree with that.

 

I would disagree that he thought of the idea.  That is factually incorrect.  Paolo Pelligrini brought him the idea.  He was smart enough to direct Pelligrini to execute on it and had the fortitude to stick with it. 

Link to comment
Share on other sites

Anyone have his historical returns? I'm wondering if he's a legitimately great manager or a more pedestrian one who disproportionately benefited from THE BIG SHORT.....

 

benefiting from the great short makes him a great manager. he was one of the very few to not only see it coming but to make himself a billionaire because of it. cheers!

 

To me that says "lucky" rather than great.

 

Kraven, I agree with your thoughts and analogy.

 

he became a billionaire because he thought of an idea and executed perfectly on it. i call that being "good". I call inheriting a billion being lucky. cheers! He also was a competent, successful money manager before striking gold. double cheers!

 

It's hard to disagree obviously about someone who became a billionaire doing anything.  We do seem to have different definitions though on what "good" means.  To me it entails a level of performance that is sustainable.  He is a bit of a one hit wonder.  Doesn't mean his other music wasn't good, but people weren't buying it.  I agree with what you said that he was a "competent, successful money manager".  If that is "good", I agree with that.

 

I would disagree that he thought of the idea.  That is factually incorrect.  Paolo Pelligrini brought him the idea.  He was smart enough to direct Pelligrini to execute on it and had the fortitude to stick with it.

 

Been a while since I read the book, but from what I remember the author portrayed it as though Paulson never really let Pelligrini share any of the glory for the trade which was an idea he presented to Paulson, he tried to convince Paulson to take some money off the table when the trade went their way and Paulson refused. But it also does point out that Pelligrini was basically at rock bottom, broke, in debt and had no luck getting a job. Paulson took him in and gave him a chance to get back on this feet.

 

My take away from the book was that Paulson had some serious balls to take the trade to the level that he did, but it seemed like he let his emotions and ego get the best of him. In this case it worked out in his favor but I think the way in which he managed his partners capital was reckless and IMO he should of started winding down the trade much earlier than he did. That opinion is based only on reading the book, so maybe the reality of what actually happened was different.

 

Link to comment
Share on other sites

Anyone have his historical returns? I'm wondering if he's a legitimately great manager or a more pedestrian one who disproportionately benefited from THE BIG SHORT.....

 

benefiting from the great short makes him a great manager. he was one of the very few to not only see it coming but to make himself a billionaire because of it. cheers!

 

To me that says "lucky" rather than great.

 

Kraven, I agree with your thoughts and analogy.

 

he became a billionaire because he thought of an idea and executed perfectly on it. i call that being "good". I call inheriting a billion being lucky. cheers! He also was a competent, successful money manager before striking gold. double cheers!

 

He was a "good" manager who got lucky...but not great. ;)

Link to comment
Share on other sites

its funny when people with barely enough money in their trading accounts for Paulson's car service has the audacity to call him "lucky" like he just woke up and was able to manage money and win big.....

 

For being 31, I'm doing just fine. ;)

 

I never said he was a bad investor, but I still claim that he was lucky. If Pelgrini never came to him virtually none of us would know who he is. That is luck. Plain and simple. Yeah, he had a ton of courage, but his long term returns do not show a great investor - 1% or so over the market since inception is not great. Granted, it's good but certainly not great.

 

By the way, someone who is a bit smarter than Paulson also doesn't seem to think he's a great investor.

 

http://dealbook.nytimes.com/2012/12/04/buffett-on-the-state-of-wall-street/

 

 

Link to comment
Share on other sites

its funny when people with barely enough money in their trading accounts for Paulson's car service has the audacity to call him "lucky" like he just woke up and was able to manage money and win big.....

 

Well, I suck at hockey and I can barely score a goal every 5 games...it does not mean that I think Scott Gomez is a great player because he's would kick my ass.

 

BeerBaron

Link to comment
Share on other sites

Far from me to defend Paulson, but some of the comparisons of performance on this thread are not fair.

 

Let's ignore the "short" homerun, and I think there is general agreement that the huge inflow of funds sunk him after that bet... so let's stay focused on his track record prior.

 

--

He did ~11% (according to Stanley P) for ~15 years vs. ~9% for the S&P.

 

Ok, good, but not "great".

 

.... but his 11% was in a market neutral merger arb fund (only one down year I believe from memory, and it was like -2%) not in a typical market risk investment.  So lower risk of downside.

 

Oh yeah, and he was charging either 1.5 / 20% or 2 / 20% which is netted against that 11% number.

 

So the guy protected the downside much better than the general stock market, and achieved higher returns by a substantial margin (I believe his 11% post fee corresponds to 14-15% pre-fee or so).

 

15% with low vol for 15 years?

 

Seems crazy to use anything less than "good" for what he accomplished.  I think when he swung for the big leagues, a lot of stuff changed.  I think there are a lot of lessons, but calling someone middling or mediocre who did what Paulson Advantage did is really harsh I think.

 

Ben

 

Link to comment
Share on other sites

Well, I suck at hockey and I can barely score a goal every 5 games...it does not mean that I think Scott Gomez is a great player because he's would kick my ass.

 

BeerBaron

But he would make you feel good about it, he is still down to earth and currently playing for the Anchorage Aces, the local semi pro hockey team, when he could have gone to Russia and made bu co bucks.  He did this last time there was a strike. he has a foundation for the local kids who need help in affording hockey and puts on camps for them.  He is one of the genuine nice guys.

Link to comment
Share on other sites

Ben,

 

I agree that I was too harsh by saying "middling." Like Kraven said, he had solid, but not spectacular results. However, I will say that since inception, the results have been middling ie you would've been better off sticking it into a total market index/s&p 500 index after taxes and fees (or close to it). For a guy to take $5 billion or so for himself and leave investors with index returns since inception...well, to me, that just ain't right.

Link to comment
Share on other sites

Just a question but do any of the people who are actually criticizing Paulson have any money management experience or even experience in the money management industry?

 

playing with petty cash in your trading account is not the same thing as managing money for third parties. Its very different once you do it for somebody else professionally and even more different once you get into the billions and billions of dollars....

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
 Share

×
×
  • Create New...