Citigroup Private Bank Said to Redeem From Paulson Fund

Citigroup Unit Said to Pull $500 Million From Paulson Hedge Fund
John Paulson, president of Paulson & Co. Inc. Photographer: Jin Lee/Bloomberg

Citigroup Inc.’s private bank is pulling about $410 million from Paulson & Co., the hedge fund seeking to reverse record losses in 2011, according to two people familiar with the matter.

The private bank is redeeming from Paulson’s Advantage Fund and Advantage Plus Fund, said the people, who asked not to be identified because the information is private. Citigroup is also pulling from the Merger and Recovery Funds, the people said.

The hedge fund, run by billionaire John Paulson, lost 18 percent this year through July in its Advantage Plus strategy, according to a monthly investor update. That fund, one of the firm’s largest, posted a loss of 51 percent last year. Citigroup’s private bank, which told customers this morning of its plan to withdraw from Paulson funds, in May advised clients not to add money to them, a person familiar with the matter said at the time.

Paulson’s Merger and Recovery funds have fared better than the average 1.9 percent gain for hedge funds this year, according to data compiled by Bloomberg. One of the firm’s so-called Merger funds, known as the Paulson Partners Enhanced fund, has returned 5.4 percent in the first seven months of this year, according to the investor update. Paulson’s Recovery Fund, which invests in assets Paulson believes will benefit from a long-term economic rebound, such as financial services and insurance companies, has returned 3.9 percent.

Armel Leslie, a spokesman for New York-based Paulson, which manages $19.5 billion, and Natalie Marin, a spokeswoman for Citigroup, also based in New York, declined to comment.

Reduced Risk

Paulson, 56, who became a billionaire in 2007 by betting against U.S. mortgages, told investors last month his firm has reduced risk in some of its funds. He also told clients that he sees a 50 percent chance the euro will unravel, according to an investor to listened to the comments.

Paulson will be returning the money invested by the Citigroup unit by March 2014 because of withdrawal restrictions in the Recovery Fund, one of the people said.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE