John Paulson Starting Real Estate Recovery Fund

Fresh off of our unofficial 'John Paulson' day on the blog yesterday, we're back again to highlight that Paulson will be going forwards with his Real Estate Recovery fund that will be aimed on investing in distressed assets. Just yesterday we examined Paulson's equity holdings, and now it looks like he's getting ready to make a splash in other asset classes. The fund will manage a few hundred million in its initial capacity (though no cap has been set) and will be managed by Mike Barr. Mike was previously at Lehman Brothers where he has experience in real estate and private equity. Paulson's initial goal is to run the fund for 7 years, investing in both residential and commercial properties. This news comes fresh off the new mortgage-market proposal by Paulson's colleague and ex-portfolio manager, Paolo Pellegrini. The two of them undoubtedly have compelling ideas on how to solve the crisis.

This fund isn't really new news, as we had heard of his proposal a while ago. However, we're finally getting concrete details and the 'green light' that it is ready to go. With his front-row seat to the mortgage and housing crisis, Paulson's timing call might prove to be very prudent. He has played the market perfectly thus far and has already gotten constructive on the sector by buying up the types of assets he was previously shorting (mortgage backed securities). Now, however, he is taking his constructiveness to a new level: by buying outright real estate. Obviously, he has a longer-term time frame in mind and will take his time sorting and sifting through the right deals. But, the fact that he is getting constructive in this arena cannot be ignored.

At the same time, it is also interesting to note his large purchase of gold which we just detailed. The hedge fund firm has said it is merely a hedge for them, as they have a share class denominated in gold. However, his large stakes in both gold and numerous gold miners is intriguing. Paulson may be getting constructive in the real estate arena, but he must still be overall cautious on the economy, the US dollar, or something of the sort. After all, why buy so much gold and so many miners? Either way, it's always interesting to note his major moves and this new fund certainly is classified as such.

Paulson's hedge fund has generated massive returns over the past two years, as he bet against financials and all things subprime. One of his funds was even up 589%. Check out his recent portfolio movements.

Dwight Anderson To Open 2 New Ospraie Hedge Funds

If at first you don't succeed, try, try again. This cliché is the root of folly on Wall Street and in the hedge fund industry in general. Perfect example: The Ospraie Fund's Dwight Anderson is set to start two new hedge funds in July. Okay, new hedge funds, what's the big deal? Well, the problem here is that Dwight Anderson lost 39% in his Ospraie Fund in 2008 and had to liquidate the fund. At its peak, Ospraie managed $3.8 billion in commodities. But if at first you don't succeed, try, try again. And, that's exactly what Anderson is set to do.

Anderson will open two new hedge funds in July of 2009, the first of which will focus on stocks of commodity and basic materials companies (The Ospraie Equity Fund). He will also open a fund focused on commodities and derivatives (The Ospraie Commodity Fund). Anderson said that he is starting these funds because he sees significant opportunities in this market, as significant as he has ever seen in his 15 years of investing. These funds will have reduced fees where investors will pay half as much as the typical hedge fund. His new funds will charge a 1% management fee and a 10% performance fee.

His Ospraie fund is named after the osprey, a marine bird of prey. Ironically enough, his fund was the one being preyed upon in 2008. The volatile year of 2008 goes to show that anyone, regardless of their background can be humbled by Ms. Market. Anderson had previously worked at Julian Robertson's Tiger Management. While we never covered Anderson on the blog, we did cover numerous other successful Tiger Cub hedge fund managers. Anderson then went to work for global macro giant Paul Tudor Jones' Tudor Investment Corp. Contrary to Anderson, Tudor has made it through this crisis largely unscathed. Scoreboard: Master 1, Apprentice 0.

Anderson started Ospraie while at Tudor and then eventually spun it off where he saw 15% annual gains from 2000 until 2007. But, even after working and learning from some of the best in the game, Anderson still got hit... hard. Interestingly enough, we see that another fund has recently spun out of Tudor Investment Corp: James Pallotta's Raptor Capital. We just started covering Raptor in our hedge fund tracking series and only time will tell if they can avoid the fate suffered by Ospraie's prior Tudor spin-off. In an unrelated note: what's up with all the funds coming out of Tudor being named after animals of prey? We found that interesting, as everyone wants to be 'the hunter.' It's just highly ironic when you become the one being hunted.

To conclude, we rejoin our market fairytale. In typical Wall Street fashion, Anderson closed his old fund and brought two new funds to the surface. When will this pitiful cycle end? It amazes us that managers are continually given money after blowing up. But, that's Wall Street and that's the hedge fund industry; folly at its best. If at first you don't succeed, try, try again. Sigh.

Citadel Starting New Hedge Funds

Ken Griffin's Citadel has plans to roll out a few more funds, even after their flagship funds had a rough year in 2008. One will focus on currencies and interest rates, one will focus on stocks, and another will focus on convertible bonds. They're trying to roll out lower fee funds in an effort to attract more investors. Additionally, they're hoping to raise $2-5 billion for the Global Macro Fund. We'd mentioned this fund back in September, as it will be ran by Kaveh Alamouti. Additionally, back in December, we noted that they had opened their Tactical Trading fund to investors. Lastly, Citadel also amended their redemption 'policy' and readers can read about it in one of their recent letters to investors.