The $3bn Paulson & Co Recovery fund, which was launched in late 2008 to take advantage of a rebound in the US housing market and economy, has decreased its net exposure from 140 per cent to 107 per cent in recent weeks, according to Mr Paulson’s letter.
Net exposure is a measure used by hedge fund managers as a gauge of their directional bias, and is calculated by subtracting total short positions from total long positions, with leverage taken into account. A net exposure of zero would imply a market-neutral portfolio with equal long and short positions.
John Paulson’s flagship Advantage fund, which manages $9bn of client money and was down 6.6 per cent for the period, has shrunk its net long exposure from 72.4 per cent to 67.3 per cent. The more specialist $4.3bn merger arbitrage funds, which make money by trading corporate names engaged in takeover talks, have scaled back from 58 per cent to 50 per cent.
Probably puked things up courtesy of the HFT traders--right at the market lows--especially when redemption money came calling!