By Amy Or
NEW YORK--Billionaire hedge-fund manager John Paulson's gold
fund declined by 12.7% last month as the price of gold dropped,
bringing the fund's losses so far this year to 22.5%, a person
familiar with the situation said.
But in a letter that Paulson & Co. sent to investors
Tuesday, along with the performance numbers, the hedge-fund manager
said the trade has reversed lately.
"Gold equities proved to be a meaningful counterbalance to the
market's downward move during the second half of the month and into
early June," it said.
Gold futures fell 6% over the course of May, slashing prices by
around $100 a troy ounce, in the biggest monthly percentage drop in
gold since December 2011.
The sharp gold-price movement came at a time when Paulson &
Co. invested in gold-related equities, believing there was
"significant undervaluation of gold equities relative to gold
prices." That trade contributed to May's decline.
In its quarterly filing on stock holdings for the first quarter,
Paulson & Co. said it held stakes in gold-related companies
Allied Nevada Gold Corp. (ANV), Anglogold Ashanti Ltd. (AU),
Barrick Gold Corp. (ABX) and exchanged-traded fund SPDR Gold Trust
(GLD) as of March 31.
Paulson's Advantage fund, an event-driven fund that seeks to
profit from takeovers and other activities, has about a quarter of
its assets in gold-related investments, including equities,
physical gold, and gold-related derivatives. The fund posted a
0.32% decline in May, less than the Standard & Poor's 500 Total
Return Index's 6.0% loss for May. Its year-to-date decline stood at
6.27%.
The letter said Advantage Fund's gold exposure helped to
mitigate broad market losses during the second half of May. The
fund gained 2.1% solely on its gold-related investments between May
15 and June 1, when the S&P index was down 4.5% during the
period.
--Tatyana Shumsky contributed to this article.
Write to Amy Or at amy.or@dowjones.com.