Recall that John Paulson (John Paulson news), hedge fund star, made a huge bet on a recovering economy with his funds. So far, the wager is not paying off. The $3 billion Paulson & Co. Recovery fund, which has large positions in big banks, took a beating to the tune of 12.39 percent in June, according to the Financial Times.

In May, the fund suffered a 9 percent loss. For the year, the Recovery fund is still up, given its solid performance in the first quarter.

Paulson's $9 billion flagship Paulson & Co. Advantage fund sank 4.4 percent in June and has lost 5.8 percent for the year. Paulson's Credit Opportunities fund, famed for its 340 percent return in 2007, was down 0.9 percent in June. On the upside, his gold fund is up nearly 14 percent for the year.

Other big names have also fared poorly, including Paul Tudor Jones and Louis Bacon. But this is where managers really earn their keep. Volatility should be red meat to them. It would be unwise to think that the year is tainted. There's plenty of opportunity for a recovery. For now, Paulson remains bullishly poised.

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