Hedge fund manager John Paulson, feted for predicting and making billions of dollars betting on a collapse of subprime mortgages in the US, says he is less certain about the country’s economic outlook and has pared positions as a result, according to an investor in Paulson & Co funds.

Still, Paulson told clients his flagship Advantage funds were back on the upswing last month after reportedly sustaining losses for the first half of the year.

On July 23, Paulson & Co’s levered Advantage Plus fund was up 3.1% from the end of June, the investor said. Earlier reports said the fund lost about 8.8% in the first of 2010.

The Advantage fund’s dollar share class was up about 2% as of July 23 compared with the end of June, after falling by 5.9% in the first half. Final results for last month are still being tallied.

A spokesman for the funds declined to comment.

Clients received a letter from $31 billion Paulson & Co this week, outlining some of the fund manager’s current views.

In May, Paulson told investors on a conference call that “I think we have the basis for a strong economic recovery” and was especially bullish on housing prices.

In making his forecasts Paulson tends to speak about an economic cycle instead of looking at developments on a month to month basis.