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) -- After earning Wall Street fame for making billions by buying protection against the U.S. subprime mortgage market, John Paulson's newest foray into the world of insurance is off to a loss-making start as the hedge fund manager bleeds red ink from the shores of Bermuda.

In April, Paulson's struggling hedge fund

Paulson & Co.


Validus Holdings


on a $500 million-plus joint investment to create


, 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, adding to a forgettable 2011.

According to Validus's second quarter results released on July 26, the joint venture between it and Paulson lost roughly 10% of the initial investment during the quarter.

Paulson funds lost roughly $50 million on the investment portfolio as of the quarter ended on June 30, while Validus lost $5 million on it's $50 million investment, according to


with the

Securities and Exchange Commission




show that four of Paulson's funds contributed $125 million each in the venture for an investment of $500 million; however, losses varied between each Paulson fund.

It was the Paulson Partners Gold Fund which suffered the greatest losses, shedding $22 million, or roughly 18% of the fund's initial investment. Paulson's flagship Advantage Fund lost nearly $18 million, while the Paulson Partners Enhanced Fund lost over $8 million in the quarter. The fund managers' Credit Opportunities Fund, which rose by nearly 600% in 2007 as the housing market soured, lost just $1.9 million.

Paulson's poor start in the reinsurance business is not just notable because of his well-publicized struggles amid a mistimed bet on U.S. economic recovery and a deteriorating position in gold and precious metals miners like


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. Other hedge fund managers like Daniel Loeb of

Third Point LLC

and Steven A. Cohen of

SAC Capital Advisors

have also recently 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.

While Paulson is entering the reinsurance business to invest premiums, Loeb's

Third Point Re

and Cohen's

SAC Re Holdings

are growing a full-service reinsurance operation to underwrite risk and invest insurance premiums. Famed short-seller and outspoken


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long investor David Einhorn was an early hedge fund mover in the reinsurance business, building

Greenlight Capital RE

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. He is also a co-investor in Loeb's 2011 venture.

In second quarter results released on Monday, Einhorn's Cayman Islands-based Greenlight Capital Re reported a net loss of 98 cents a share or $36.1 million, marked by a souring of the company's investment portfolio. "During the second quarter of 2012, our investment portfolio gave back some of the gains we generated in the first quarter of the year," said Einhorn, in a statement released with earnings. The firm reported a $36.9 million loss on investments in the quarter, a turn from a $34.8 million profit in the first quarter.

"Equity markets in the U.S. and Europe are volatile, due to slowing economic growth and concerns about the sustainability of monetary and fiscal policies. Rising concern about sovereign debt, particularly in Europe, appears likely to limit further fiscal stimulus. Given the challenging macroeconomic environment, we intend, for the foreseeable future, to continue holding a significant position in gold and other macro hedges," said Greenlight Capital RE, in a Monday SEC filing that indicated the firm holds a 'conservative' 51% net long position.

In contrast, Paulson has been burned recently by a bullish stance on U.S. equities and a stronger performing gold bet that's recently looked long-in-the tooth. On July 26, NovaGold, a miner 13% owned by Paulson funds fell by 25%, after a joint venture with

Barrick Gold


fell through. Other Paulson gold stocks like

AngloGold Ashanti

( ANG) have also struggled in 2012. Still, recent investor letters indicate that Paulson is also concerned by an escalating european debt spiral.

In July,


reported that Paulson & Co. lost money across all of its funds in the month of 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 roughly $22 billion in client assets, it is an inauspicious start for the hedge fund manager, who is looking to stem losses and asset outflows.

For more on Paulson investments, see why he is

kicking his heels in on financial sector investments


>>View John Paulson's Portfolio

-- Written by Antoine Gara in New York