Friday, August 24, 2012

Citigroup Inc. (NYSE:C)’s Private Banking unit to Redeem $410 mln from Paulson & Co Fund

Paulson && Co hedge fund, managed by John Paulson, is set to face more trouble with the private banking arm of Citigroup Inc. (NYSE:C) planning to withdraw $410 million from the fund Reuters reported citing sources.

Citi Private Banking told its advisors in a call on Thursday that it would withdraw from the hedge fund's Advantage portfolios and the Merger & Recovery funds.

Paulson's funds have not been performing very well his year compared to the hedge fund industry in general that has gained 2.9 percent till July this year, lagging the broader market which has gained 7.4 percent in the same time period.

Paulson & Co's Advantage Plus fund has seen an erosion of 18 percent in its portfolio value this year while the Advantage funds have seen a 13 percent fall.

Apart from Citi, Morgan Stanley has also invested in the fund and both institutions had put the hedge fund on their watch list earlier this year when returns started to falter.

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To do him justice, Paulson rose to fame after he did several lucrative deals, betting on the sub-prime mortgage crisis and the gold market where he managed to make billions of dollars in returns.

However, like many others, Paulson also made a wrong call on the recovery of the U.S. economy and that was the undoing of his once-profitable fund.

In 2011, the flagship Advantage Plus fund ended down 52 percent, while the vanilla Advantage fund fell 36 percent.

Paulson has promised to set right the ship this year but so far his attempts have not been successful, so far as his more prominent funds are concerned.

His Recovery fund is however doing much better and gave a return of 3.9 percent between January and July this year.

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