Paulson outlines his fears

BILLIONAIRE American investor John Paulson has said his hedge fund could suffer redemptions worth between 20 and 25 per cent of its assets by the end of the year.

The “worst case” scenario was outlined in a call to Paulson & Co investors yesterday. They were told that leverage in the firm’s Advantage Plus fund would be cut from 1.5 to 1.15 times, City A.M. understands.

Paulson also said he is “100 per cent” committed to continuing to run his funds. Both Advantage Plus and its renowned Advantage fund have had their net exposure to US markets halved from January.

The value of Advantage Plus tumbled 19.3 per cent last month leaving it down 47 per cent on the year so far.

Paulson’s fund, which did not comment, profited from betting against the US housing market in 2007 but its bullish position on the economy this year has yet to be justified.