Despite big losses last year, billionaire hedge fund manager John Paulson, who made bank in 2011 by betting against subprime mortgages nationwide, is continuing to make bullish investments in residential and commercial mortgage-backed securities, Bloomberg News reported, a move that his helped his Credit Opportunities fund to gain about 1 percent last quarter. The gain of 1 percent helped to limit the fund’s 2011 decline to 18 percent, Bloomberg noted.
“While the housing market continues to face some weakness, the recent correction in [CMBS] prices has been more severe than justified by underlying real estate market fundamentals,”
Paulson said in an October investor letter obtained by Bloomberg. “This creates an opportunity to benefit from very attractive yields on both” residential and commercial mortgage-backed securities.
Credit Opportunities’ Advantage Plus fund, one of the company’s largest, slumped 51 percent in 2011 as bets on a U.S. economic recover failed to materialize. [Bloomberg]