Hedge fund guru John Paulson’s flagship fund has lost 6 percent of its value in May thanks to market turmoil, the Financial Times reports.
The $9 billion Paulson & Co. Advantage Plus fund is down 7.6 percent from January to May, as market watchers wonder whether Paulson, famous for calling the housing meltdown, has been too bullish on markets.
“The average hedge fund lost 1.39 percent over the month according to preliminary data from Hedge Fund Research,” the Times says.
In his most recent correspondence with investors Paulson says difficulties for U.S. banks had taken their toll on his portfolios but adds he remains optimistic, adding the U.S. stock market could rally as much as 40 percent from its first quarter level this year.
Paulson funds in the past have tended to weather volatility well.
In fact, hedge funds themselves are no strangers to volatility, and some are seeing opportunities in today’s turbulent times.
Many hedge funds are snapping up stocks in bargain retailers such as Dollar General, Family Dollar Stores and Big Lots on talk of takeovers in the sector.
Pershing Square's Bill Ackman, for example, has said he was buying shares of Family Dollar.
"It's a business that continues to take share even in recessionary environments," says Ackman, according to Reuters.
Even without takeover talk, market watchers say bargain retailers will do well in the current weak economy.
"They're just in the sweet spot right now," says Wells Fargo analyst Matt Nemer, according to Reuters.
"Their prices are really very, very low and they have convenient locations that you don't have to spend a lot of gas to get to."
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