Hedge Funds: Paulson Calls it Quits

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John Paulson — hedge fund manager of Paulson and Co. — is officially closing his office to public clients.  Paulson and Co. will exclusively function as a family office.  Paulson wrote in a letter that he will be returning all investments to clients after closing.  John Paulson is known for predicting the housing crisis and the role of mortgage backed securities in 2007.  After investing in credit default swaps, Paulson made $4 billion.  

The Decline of Paulson & Co.

It is unknown exactly how much investors will get back; however, it is likely that Paulson’s New York City office will continue its trend of cutting down on employees.  Many prominent employees at the firm previously left including Samantha Greenberg, Dan Kamensky, James Wong, and Michael Barr.  With many losses in 2011, Paulson & Co. was already in decline.  Subsequent to a $5 billion profit in 2010, Paulson’s firm had shortfalls in Bank of America, Citigroup, and Sino-Forest Corporation.  John Paulson continued to face decline in 2014 when he partnered with United Kingdom-based Schroders to make up for his previous losses.  Paulson’s merger fund with Schroders was down 17.9 percent in July of 2014 and continued to fall.  Fast forward to 2016 and Paulson’s holdings in the Pharmaceutical sector with Allergan, Mylan, and Shire had led to short returns.  With these back-to-back shortcomings, it is no surprise that Paulson’s hedge fund would soon close off to public investors.  Earlier this year, Paulson completely owned many of Paulson and Co.’s $10.7 billion in assets.  This was another hint that many investors had already ditched the firm.  

Looking Forward

 

Although Paulson has a history of shying away from the media and announcing major deals, he plans to remain active in the markets.  He will be leaving an accomplished firm that managed up to $38 billion at its peak in 2011.  Paulson has donated to many causes including $20 million to Central Park and $400 million to his alma mater Harvard Business School. 

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