Are Paulson’s Losses on Sino-Forest Overstated?

Reports have been out that Paulson & Co. had suffered severe losses in a Chinese forestry company called Sino-Forest.  Billionaire hedge fund manager John Paulson may not have been hurt as badly as some media reports have suggested.

A report from Absolute Return shows that Paulson has sent a letter to its investors explaining why he bought Sino-Forest and later dumped the stock after becoming  the largest stakeholder of the company which has been dogged by accounting issues.  The losses may be less than thought, the publication says.

Many other reports have Paulson having taken a bath in his gold stock and bank stock exposure, where those bets have seen gains erode or turn into actual losses.  The WSJ noted yesterday that his Advantage Plus Fund was down about 15% in June, with the 2011 loss to date being more than 20%; and his Enhanced Partners Fund was said to have lost about 8% in June.  The WSJ also noted Paulson’s exit in Sino-Forest was caused by uncertainty over public disclosures and financial statements.

Investors hope to make money regardless of the market.  The public also seems to read more into losses over success.  Even billionaires take major financial hits sometimes.  The markets have proven over and over how no one is immune from making errors or being unlucky in timing.

JON C. OGG