Bank Of America All Of A Sudden Too Good For John Paulson

Apparently some investors in the hedge fund are willing to stick out bets on Greece and Puerto Rico, while others? Not so much.

Author:

Bess Levin

Updated:

Jan 14, 2019

Original:

Aug 5, 2015

You make a couplea bets on floundering economies and all of a sudden clients want nothing to do with you.

The billionaire investor John A. Paulson is having a rocky year. And at least one major investor may have had enough. The wealth management arm of Bank of America Merrill Lynch is liquidating its clients’ money from one of Paulson & Company’s funds and has put another fund under “heightened review,” according to two people with knowledge of the hedge fund.

Bank of America Starts to Pull Clients’ Money Out of a Paulson Fund [Dealbook]

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Puerto Rico's going kind of bankrupt.

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Earlier this month, Bloomberg reported that John Paulson was considering making Puerto Rico his home for a little more than half the year, having been intrigued by the idea of working from the beach and not having to pay capital gains taxes. For its part, PR was pretty excited about the prospect of the hedge fund manager calling the island home on tax forms, as his presence would create a much needed you scratch our back we'll scratch yours situation for the local economy. And while a spokesperson for Paulson has categorically crushed the dreams of the Commonwealth, apparently everyone has gotten over it pretty quickly and would like to make it clear that anyone with money to spend is welcome, nay, encouraged to come on down. Millionaires would be good, billionaires are better but beggars/choosers/etc.

Hedge Funds

Was 2011 a very kind year to John Paulson? No, it was not. Is 2012 shaping up to be any different? Not really, no. His proclamation that last year's losses were but an “aberration” has not exactly been backed by the fact that AP was down 16 percent through June, Morgan Stanley’s prime brokerage put Paulson and Co. on a list of firms it warns clients not to invest with, and a few clients have not only quit the fund but told anybody who will listen that leaving was one of the best decisions they've ever made. Also not great is the fact that assets under management have declined 44.9 percent to $17 billion from $38.1 billion, due to a combination of unfortunate performance and redemptions. Happily, though, there is a silver lining that perhaps few people have thought of, namely that John Paulson's got mucho of his own dinero in the firm and he hasn't given up on the place yet. ...the firm has a saving grace: About 60%, or $12.6 billion of June 30 assets are from employees. Observers said it is impossible to know how much of that employee asset pool belongs to John Paulson, the firm's founder and president, but they speculate it is the vast majority. (By contrast, about 31% or 32% of Paulson & Co.'s assets are from institutional investors.) One source said the hedge fund manager's size at its peak — before the performance decline — combined with the high percentage of employee capital have insulated Paulson from the crippling impacts that performance declines of this size and client redemptions would wreak on other firms. “It's impossible for any other hedge fund firm to lose $17 billion and still be in business,” said the source, who asked for anonymity. “The firm will not fall apart because of this. Just John (Paulson's) money alone is enough to keep the firm in business. But he is not going anywhere. There are absolutely no signs that John Paulson intends to do anything other than manage his way out of this.” This scenario would also have to assume that the firm stops losing money but regardless, suck on the above, New Mexico. Paulson Tries To Bounce Back [P&I via Dealbook]

News

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