Paulson Winds Down Long-Short Equity Fund Amid Strategy Refocus

  • Fund represents 5% of Paulson & Co. assets, firm tells clients
  • Jim Wong, head of investor relations, departing after 14 years

Paulson & Co., the investment firm that shot to fame betting on the collapse of the U.S. housing market, is closing its 2-year-old long-short equity fund in an effort to shift strategies after a steep drop in assets.

“We are re-focusing the funds on our core areas of expertise in merger arbitrage and distressed credit, where our assets have been growing,” founder John Paulson said in a letter to investors seen by Bloomberg News. “We thank the long-short team for their efforts on behalf of the company.”

The fund, led by Guy Levy, represents about 5 percent of the New York-based firm’s assets under management, according to the letter. It focused on health-care and pharmaceutical bets -- a sector that’s been responsible for some of Paulson’s biggest money-losers recently. Though the fund was down in 2016, it’s made money this year, according to people with knowledge of the matter. It was up 9.5 percent through May, Bloomberg reported last month.

The fund was started in 2015 with $500 million, and was the first of Paulson’s hedge funds not to be managed by the billionaire founder. 

But now Paulson, who started the firm in 1994 with a focus on merger-arbitrage, is looking to get back to his roots after a string of missteps triggered the collapse in assets. Since the end of 2015, they’ve fallen by $6 billion, Bloomberg News reported in June. Of its $10 billion, Paulson manages about $2 billion of client money. Most of the remaining amount is Paulson’s own fortune. It’s been a remarkable turn for Paulson, which at its peak in 2011 oversaw $38 billion -- half of which belonged to outside investors.

Read more: Paulson struggles to hold on to client capital

IR Transition

Amid the changes, Jim Wong, the head of the firm’s investor relations, is leaving after 14 years, Paulson told clients in its letter. He will be succeeded on Aug. 1 by Tina Constantinides, who’s been with the company for 13 years.

The closing of the long-short fund and departure of its team will have little impact on Paulson’s major investments in drug stocks such as Valeant Pharmaceuticals International Inc., because they’re mostly held within his other funds, said one of the people, who asked not to be named because the information isn’t public. Paulson became the largest shareholder of the troubled drugmaker in March and gained a seat on its board last month.

A spokesman for the firm declined to comment.

— With assistance by Katherine Burton

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