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Despite Losses, Investors Stick With Paulson Fund
The New York Times | November 02, 2011 | 10:42 AM EDT

John A. Paulson, the billionaire hedge fund manager who made his fortune betting against subprime mortgages, has been fodder for Wall Street gossip as rivals wondered whether investors would bolt after suffering staggering losses this year.

At least for now, pensions, endowments and wealthy individuals are standing by their money manager. Redemption requests, which were due by Oct. 31, totaled less than 8 percent of assets, or roughly $2.4 billion, according to a letter that Mr. Paulson sent to investors on Tuesday.

It’s a rare feat for a hedge fund . When returns sink by as much as 50 percent — as one portfolio did at Paulson & Company — investors typically flee at the first opportunity.

But Mr. Paulson has built a reservoir of credibility, largely through past performance and marketing efforts.

Longtime clients are still giddy from 2007, when one credit-focused fund gained 600 percent amid the broader market downturn. Newer institutional investors that have lost millions, like public pensions in New Mexico and Missouri, figure returns will bounce back. Some are even pouring additional money into its funds in anticipation of a turnaround, money that will help offset some of the withdrawals.

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