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January 30, 2009

John Paulson's Year-End Letter

The NYT's Dealbook has obtained a copy of John Paulson of hedge fund Paulson & Co.'s year-end letter, and it is a must-read. Paulson blew the doors off last year, heavily shorting financials, both directly and via credit default swaps, turning in 37.6% return net of fees. That is beyond outstanding in a year that destroyed many other other funds' reputations.

Looking forward to 2009, Paulson remains highly bearish. Here is his general strategy, he says, for the first half:

• Slight short exposure to equity markets
• Remain short financials
• Focus on long distressed opportunity
  • Mortgages
  • Bankrupt debt
  • Distressed
  • Capital restructurings
• Focus on strategic merger deals
• Maintain short focus on financials, with the belief that we only perhaps half-way thru.

The letter is at the NYT, but I have echoed the NYT's Scribd copy below as well.

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