Hedge-fund manager John Paulson apologized to his investors, sayingperformance at his funds this year is 'the worst in the firm's 17-year history.'

In his third-quarter letter dated Oct. 28 to investors, Mr. Paulson, who won fame for reaping billions of dollars by betting against the U.S. housing market, said 'we are disappointed and apologize.'

Two of Paulson & Co.'s largest funds