People who heard the remarks in Las Vegas on Wednesday said Paulson barely touched on the losses that his long-standing bet on gold and gold miners had inflicted on several of his portfolios, including a small fund which has lost 47 percent this year.
"Don't focus on weekly or monthly returns," Paulson told attendees at the fifth annual Skybridge Alternatives Conference, adding clients should not micro-manage their fund managers but find someone they like and stick with them for the long term, the people who heard the comments said.
Paulson was being interviewed by Anthony Scaramucci, who founded SkyBridge Capital and is a large investor with Paulson's Recovery Fund. Reporters were not permitted inside the Bellagio's Grand Ballroom because Paulson's remarks were off-the-record. But five people who heard the 30-minute interview told Reuters what he had said.
There was little tough questioning for the man who has notched some of the $2.25 trillion hedge fund industry's heaviest losses in the past two years and is losing more money this year due to his wager on gold.
Investors including state pension funds and big banks like Citigroup have steadily pulled money from his New York-based Paulson & Co, helping cut the firm's assets to roughly $18 billion from $38 billion at the start of 2011.
Much of the interview was spent reminiscing about Paulson's famed subprime trade which netted the 57-year-old manager $4 billion in 2007 and won him legions of new investors.
He then gained even greater fame on Wall Street with a timely bet on gold that earned him roughly $5 billion in 2010.
But in the last 2 years his record has soured, prompting some in the audience to complain that Paulson spent more time reliving his glory days than taking a hard look at what was hurting his funds now.
Scaramucci asked little about Paulson's current gold troubles, prompting one money manager to fume: "It was such a softball interview."
Paulson did briefly speak about the prospect for inflation, which he expected to revive in the wake of central banks' easy money policy. He said it was "tough to predict" when it would rear its head, according to one person's notes.
He preferred to focus on his best performing vehicle -- the Paulson Recovery fund -- which has gained 22 percent this year and through which Paulson owns the MGM Resorts International, which owns the Bellagio Hotel where the conference is taking place. Paulson said valuations for hotels tended to drop during recessions but had room to grow during a recovery.
Anthony Scaramucci, whose hedge funds firm Skybridge hosts the annual conference, has been able to recruit some of the best known names in the industry to speak at the event, even when they are in the doldrums.
Last year, for example, embattled Harbinger Capital founder Philip Falcone appeared at the SALT conference one week before his telecom venture Lightsquared filed for bankruptcy. In 2011, SAC Capital Advisor's Steven A. Cohen was a keynote speaker at a time when his fund was coming under scrutiny as part of the government's insider trading probe.
The conference has become the must-attend event of the year for the $2.25 trillion hedge fund industry. During the three-day meeting, managers, investors and service providers network in the halls of the Bellagio conference area but also mingle pool-side, by the blackjack tables and at private dinners at some of Sin City's best restaurants.
During the day thousands of attendees listen to panels on hot topics ranging from regulation to macro risks, as well as fireside chats with managers like Paulson. But Scaramucci likes to keep things fun, and one of this year's biggest draws was movie star Al Pacino. Scaramucci is an executive producer on an upcoming Pacino film.
Paulson may not be a Hollywood star but he dressed like one with a dark suit, white shirt and no tie. And despite his poor performance, he still managed to draw a standing room only crowd.
(Reporting By Svea Herbst-Bayliss; Editing by Stephen Coates)
By Svea Herbst-Bayliss and Katya Wachtel