Outside of merger arbitrage, Paulson added to his gold bet, buying nearly $600 million worth of the SPDR Gold Trust (GLD) fund, while he pared a leading stake in Hartford Financial (HIG) -- an insurer he pushed to break up -- by nearly 20% to $552 million.
The fund's M&A arbitrage success also comes as his newest foray into the world of insurance is off to a loss-making start.In April, he teamed with Validus Holdings (VR - Get Report) on a $500 million-plus joint investment to create PaCRe, a Bermuda-based reinsurance company with policies underwritten by Validus and an investment portfolio managed by Paulson & Co. So far, the venture is down sharply, as Paulson suffers from losses in many of his largest funds. According to Validus' second-quarter results released July 26, the joint venture lost roughly 10% of the initial investment during the quarter. Paulson's poor start in the reinsurance business is notable because other hedge fund managers like Daniel Loeb of Third Point LLC and Steven A. Cohen of SAC Capital Advisors have also entered the reinsurance business -- which is essentially insurance for insurers -- as they look for new ways to grow investing capital in an environment marked by investor withdrawals and weak returns. The fund's investing struggles are well-documented. In July, Bloomberg reported that Paulson & Co. lost money across all of its funds during June. While roughly $50 million in new reinsurance-related losses are unlikely to make a big dent in the performance of Paulson funds, which manage $22 billion in client assets, it is an inauspicious start for the hedge fund manager who is looking for a little luck. >>View John Paulson's Portfolio -- Written by Antoine Gara in New York