Hedge fund legend John Paulson apologized to investors for what he is calling a year that has been “the worst in the firm’s 17 year history.”
“We are disappointed and apologize,” the Paulson Funds said in a letter to investors obtained by CNBC.
Paulson’s funds stumbled significantly this year. The Paulson Advantage fund was down 32.57 percent for the year. The Advantage Fund Plus, a leveraged version of the Advantage fund, was down 45.35 percent. That represents a slight recovery from an earlier reported decline of 47 during the first nine months of the year.
What happened? Paulson misread the macroeconomic conditions, according to the letter, which is titled "2011 Third Quarter Report."
“At the beginning of the year, we positioned our portfolios with net equity exposure appropriate for growth in the U.S. and an orderly resolution of Europe’s sovereign credit issues. However, as the year progressed, our assumptions proved overly optimistic and our net equity exposure was too great. Growth in the U.S. slowed and Europeans leaders were, as yet, unable to deal with the escalating sovereign debt crisis,” the letter says.
The 24-page letter describes the fundamentals of the portfolio companies as “sound” and says they had “strong second quarter earnings.”Page 1 of 3 | Next Page