John A. Paulson, president of Paulson & Co., attends the UJA Federation of New York’s annual Wall Street Dinner in New York, U.S. (Photographer: Rick Maiman/Bloomberg)

Paulson Is Said to Push Investors Out of Some Hedge Funds

(Bloomberg) -- Billionaire John Paulson, whose hedge fund’s assets have plunged, is opening the door for more money to leave.

Paulson’s namesake firm, once one of the biggest in the industry, will return money to investors in some funds including the Credit Opportunities, said people familiar with the matter. Investors in that credit fund can transfer their capital to a separate pool or they’ll be forced to redeem. The firm also continues to cut staff, this week letting go of some senior traders and partners.

It’s a sobering turnabout for Paulson, who shot to fame and fortune a decade ago with a dramatic, winning bet against the U.S. housing market. But after a series of missteps, the firm’s assets under management have dwindled to about $9 billion from a $38 billion peak in 2011. Most of what’s left belongs to Paulson himself.

Paulson’s share of the firm’s funds has grown in recent years as investors left and performance in several funds suffered. Paulson’s capital, and that of his internal staff, made up 90 percent or more of at least five of the firm’s funds, Bloomberg has reported. The funds affected by the current changes predominantly manage his personal money.

The question now is whether Paulson, 62, will ultimately shut his firm to outside investors altogether. For now, there are no immediate plans to turn the firm into a family office, people close to Paulson say. Instead it’s re-focusing on distressed debt and merger arbitrage strategies.

A representative for the firm declined to comment about changes to the funds.

Losing capital may make it harder for the firm to operate and pay staff. The company this week let go of its head of trading, Keith Hannan; head credit trader, Brad Rosenberg; and partners Victor Flores and Allen Puwalski.

The cuts add to a slew of layoffs that had already shrunk staff to 95 people down from 128 in 2016, Bloomberg reported last month. The previous departures included money manager Guy Levy and his team, which oversaw a long-short equity fund that ran about 5 percent of the firm’s assets, as well as Jim Wong, the head of investor relations. Sheru Chowdhry, who co-managed the Credit Opportunities fund, left in June, and Nitin Dahiya, an analyst who focused on credit, also departed. The company’s investor relations team has also lost several people.

“We are rightsizing the firm to focus on our core expertise in areas that are growing,” according to a statement Friday from the hedge fund about the layoffs.

Paulson is also moving his hedge fund company’s New York headquarters this year to the offices of Steinway Musical Instruments, the piano maker he purchased in 2013, Bloomberg has reported.

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