UPDATE 1-Paulson eyes housing rebound, limits access to funds

* Paulson sees V-shaped recovery, gains in house prices

* Plans to limit access to Advantage Funds

* Advantage Funds oversee roughly $19 billion

By Svea Herbst-Bayliss

BOSTON, May 10 (BestGrowthStock) – Hedge fund manager John Paulson,
who earned billions by correctly betting that U.S. housing
prices would fall in 2007, now expects homes to soon cost more
and provide critical fuel for growth to rebound.

“I think we have the basis for a strong economic recovery,”
the billionaire manager told investors on a conference call on
Monday. “I think that we will continue to grow in excess of the
estimates.”

Three years ago Paulson & Co bet that U.S. home prices
would fall yielded the firm $15 billion and turned it into one
of the industry’s biggest and most revered.

Some of the luster appeared to have dimmed last month when
financial regulators charged Goldman Sachs (GS.N: ) with civil
fraud for misleading investors in a deal in which Paulson
helped select mortgages. No one at his firm has been charged
with wrongdoing.

Paulson also told investors he would soon restrict access
to his $19 billion Advantage Funds.

The 54-year-old fund manager spent 1 hour and 20 minutes
laying out arguments for why he expects the economy to rebound
and detailing how he overhauled portfolios to make sure
investors would benefit from the trend for years.

“We are pretty excited by the opportunities in front of
us,” he told clients who dialed in from around the world.

Stocks emerging from bankruptcy will be especially
lucrative, Paulson forecast, noting that this may also be an
ideal time to purchase a house.

“If you don’t own a home today, now is the time to buy
one,” Paulson said, adding that people may want to consider
buying a second house or helping relatives buy one.

Housing prices, he said, will likely grow 3 percent to 5
percent this year and increase by 8 percent to 12 percent next
year. His optimistic outlook is not shared by everyone and
Fannie Mae (FNM.N: ) and Freddie Mac (FRE.N: ) recently offered
much more gloomy forecasts.

Overall Paulson forecast a V-shaped economic rebound,
citing news that payrolls surged 290,000 last month, easier
bank lending, as well as fiscal and monetary stimuli.

BUSINESS AS USUAL

The call was designed to give investors an interim update
on Paulson’s views on the economy between his twice-annual
investor get-togethers.

But it also allowed him to signal that it is business as
usual at his Manhattan-based fund less than one month after his
firm was pulled into the Goldman case.

About three weeks ago Paulson told investors over and over
that his firm had done nothing wrong in helping select
mortgages for the Goldman deal.

Indeed many investors seem to have moved on already,
focusing much more intently on his views on the economy than
the fallout from the Goldman case.

On Monday, only one question touched on the matter when an
investor asked how many people had asked to get their money out
at the end of April, the normal deadline for redemptions.

Redemptions for the quarter are running below average,
Paulson’s chief of investor relations said. The fund manager
added that he expects future inflows to offset redemptions.

Paulson’s performance has been strong across the board
since January with his Recovery fund, which bets on companies
such as Bank of America (BAC.N: ) gaining 25 percent in the first
four months of the year. The credit fund is up about 10 percent
and his new gold fund is up about 4 percent. All are beating
the average hedge fund’s 3.79 percent return since January.

The fund manager’s bullish view on housing stood in stark
contrast with mortgage giant Fannie Mae which on Monday said it
expects weakness in the housing and mortgage markets to
continue throughout 2010. Last week Freddie Mac, in a
regulatory filing, predicted that U.S. home prices would fall
further over the “near term” before any sustained recovery in
housing.

LIMITING ACCESS

Turning back to his own funds, Paulson said that in general
his portfolios have not been hampered by their increasing size
but that he decided to close the Advantage Funds to new clients
this year. He plans to announce details later.

Paulson’s funds have become extremely popular with private
wealth managers, many of whom have said they want to get larger
allocations for their clients.

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(Additional reporting by Albert Yoon in New York; Editing by
Richard Chang)

UPDATE 1-Paulson eyes housing rebound, limits access to funds