New York (HedgeCo.Net) – Billionaire and hedge fund manager extraordinaire John Paulson has reportedly pocketed $139 million by betting against the Royal Bank of Scotland, further fueling cynicism that shorting aids in driving down share prices.
Paulson is no stranger at predicting trends and shorting companies that he feels fit. Late last year, his New York-based Paulson & Co. disclosed short positions in the British mortgage lender HBOS, Barclays and Lloyds TSB.
Investors turn to Paulson because he seems to have a knack for placing bets that he feels will turn out in his favor. Paulson infamously bet against the U.S. housing market in 2007, which garnered himself a $3 billion paycheck while returns on his hedge funds continued to rise. In 2008, when most hedge funds lost an average of 15 percent on the year, Paulson’s funds kept steady, with his Advantage Plus fund up 20 percent.
While some argue that the practice of shorting is responsible for driving down share prices, many feel that is an unfair assumption. The ban on short selling that was enacted last September in the UK was finally lifted earlier this month, although short positions are still required to be disclosed. The Financial Services authority has said they would reinstate the ban if it proved to be needed.
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