For Paulson, a so far pyrrhic victory on a breakup of Hartford - the hedge fund's fifth largest holding according the a June 30 filing with the Securities and Exchange Commission - underscores a rough string of post-crisis investments.
Earlier in September, Bloomberg reported a 11% jump in Paulson's Gold Fund in August only helped to pare fund losses to 15% for the year, as gains in the hedge fund's flagship Advantage Fund and Enhanced fund also simply cut at year-to-date losses. At the start of August, Bloomberg pegged overall fund losses at roughly 20%, adding to 2011 losses in the neighborhood of 50%.
In addition to a rally in gold prices in the past two months, Paulson's also benefitted from non-activist investments that may be closer to the hedge funder's specialty.
By deferring to his roots in merger arbitrage -- the art of guessing which companies will be taken over - Paulson's likely found his biggest successes of the year. Three of Paulson's investments, a stake in engineering specialist Cooper Industries and increased positions in Quest Software and Gaylord Entertainment -- the owner of the Grand Ole Opry in Nashville -- were M&A targets in the second quarter.Still, with respect to Hartford, there's reason for Paulson to remain cautiously optimistic. When Hartford unveiled it asset sale plans, Wells Fargo analyst John Hall noted that the plan could be a first step in an eventual split as Paulson outlined. "While these actions fall short of a full split of the company's non-life and life operations, we think they will position the Hartford to better pursue a split in the future," wrote Hall on Mar. 21. On Friday, Hall upgraded Prudential shares to buy, while cutting The Hartford from market perform to sell. For more on Paulson & Co's investment battles in 2012, see why the fund is getting burned in offshore insurance. >>View John Paulson's Portfolio TheStreet Ratings gives Hartford Financial Services Group a C- grade . -- Written by Antoine Gara in New York