NEW YORK (Reuters)—Hedge fund manager John Paulson's credit opportunities and merger arbitrage funds were up 6.6 percent and 3.3 percent year-to-date through the end of May, respectively, easily surpassing their benchmarks, according to an investor in attendance at Paulson & Co.'s recent mid-year client event.
Paulson, who runs more than $21 billion and made headlines last week on news he amassed a large stake in Allergan Inc. of more than six million shares and supports a deal between the Botox maker and Valeant Pharmaceuticals Inc., told clients at the recent London event that merger arbitrage spreads are "becoming attractive," noting Allergan and Mallinkckrodt's acquisition of Questcor Pharma.
Paulson's merger fund is up 3.3 percent year-to-date as of the end of May, beating Hedge Fund Research Inc's Merger Arbitrage Index which is up 1.01 percent for the same period and HFRI's Event-Driven Index at 3.07 percent. Paulson's credit opportunities fund, meanwhile, is posting returns of 6.6 percent, easily exceeding HFRI's Credit Arb Index at 3.23 percent and HFRI's Distressed/Restructuring Index at 4.16 percent.
Paulson told clients his credit funds are "outperforming in a low-yielding environment" and that his current credit portfolio is "fully invested" to drive performance through 2015, according to the investor who attended Paulson's June 12 event. Paulson said his firm has a "skilled team to exploit event-driven credit opportunities," according to the investor source.
A spokesman for Paulson & Co. declined to comment. Paulson & Co is one of the hedge fund industry's biggest firms, and thanks to its strong returns last year, Paulson himself earned $2.3 billion last year, according to Institutional Investor's annual ranking.
By Jennifer Ablan