Gold has glittered over some of John Paulson’s blushes. The hedge fund billionaire’s flagship fund was down 23 percent in the year to August — but holders of its gold-denominated shares were still just ahead. At Ray Dalio’s giant Bridgewater Associates, though, investors in its main fund were up 25 percent without any gilded assistance. Though the performance of any one fund is far from the whole story, the huge spread of returns is eye-catching.

Paulson & Co runs about $35 billion of investor cash and Bridgewater handles about $122 billion, making them two of the largest hedge fund operations. Often, the biggest winners and losers are smaller funds; so far in 2011, Bridgewater and Paulson (ignoring the gold shares) are near the top and bottom of the heap, respectively.

The typical fund has lost just over 1 percent for the year so far, according to Hedge Fund Research, turning negative in August when market concerns about European and U.S. debt caused the Chicago Board Options Exchange’s VIX index of stock volatility to spike to levels scarcely seen since the crisis in 2008. In such conditions, registering only a small loss for the year to August, against a 3 percent decline for the S&P 500, is surely a relief for hedge funds big and small that did so — and even a modest profit is cause for cheer.

Dalio’s unusual investment philosophy often results in contrarian bets, and the approach has served Bridgewater handsomely this year, on top of returning 45 percent in 2010. Before that, the firm also had a good crisis, even if Paulson had a better one. But Paulson’s belief in a turnaround for the U.S. economy, expressed partly through holdings of Bank of America and other bank stocks, has cost him dear of late.

He may prove premature rather than wrong — this time last year, his main fund was also down and he ended the year well ahead. Either way, another big Paulson theme is on a roll. His gold fund is up 21 percent this year, mostly in August. And gold-denominated shares for his other funds, used by about half his customers, are all up for the year except for the leveraged version of the Advantage fund.

Of course, Dalio and Paulson aren’t trying to do quite the same thing — and certainly not in the same way. And their headline numbers are only two examples of the dramatically mixed fortunes experienced by the industry of late. But if nothing else, the contrast underlines the challenges facing even the smartest investors in rocky markets. – Reuters