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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