UBS and Paulson Updates

November 3, 2011

We have some updates on recent posts regarding the UBS restructuring and John Paulson’s terrible adventure.

UBS Corrects the Record

Regarding our recent post tracking reports of an announcement by UBS that it was planning to restructure in the wake of the $2.3 billion trading scandal, the company has come out and flatly denied any plans to dismantle its alternative investment businesses. Somehow Reuters got it wrong when it reported that UBS senior management was considering divesting itself of its private equity and hedge fund arms to focus on its core businesses.  There was no word on the proposed plan to scale back its fixed income business or its plan to reduce its presence in the U.S.  We’ll post any updates as they become available.

Can it Get Any Worse for Paulson?

John Paulson hedge fund

Source: weblogs.baltimoresun.com

In our recent post on the 2011 hedge fund scorecard we posed the possibility that John Paulson would face a mass exodus as the quarterly redemption period approached. It seems that he has dodged a bullet, more like a missile, this time around as the number of redemption requests, which had to be filed by October 31, came in much lower than expected. All told, only 8% of his funds’ $30 billion walked out the door, which is mind-boggling considering the size of a hole they dug for investors this year.  It seems that his offer to cut fees was enough to placate his investors for now.

One has to wonder whether the other 92% were aware of Paulson’s latest folly which was his fateful decision to exit the equities market at the moment it decided to post its largest monthly gains in a decade. Having lost a huge bet on a recovering stock market for the first nine months of the year, with his two biggest funds losing 47% and 30%, Paulson finally decided to cut his losses and reduced his equity holdings in October as the S&P 500 climbed by more than 10%. He did manage to net out a 1% gain for his loyal investors.

 

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