Two years ago, things were going pretty well for Paulson & Co. For what felt like the first time in memory, the firmwasmakingmoney. Of course, it wasn’t making nearly as much as it had lost the previous year, but baby steps. It seemed like the perfect time for a new venture: a long/short equity fund. In addition to being Paulson’s first foray out of its arbitrage-distressed credit comfort zone, it was the first time a fund at the firm was run by someone other than the namesake.
Of course, as we now know, that decent start to 2015 didn’t last, and 2016 saw a return to double-digit losses. The nascent long/short equity fund wasn’t immune from the red ink, either. As assets under management flew out the door, Paulson came to realize he didn’t need to pay some other guy to lose his clients money; he was doing a bang-up job of that all on his own. Plus, the long/short fund’s manager, Guy Levy, was starting to make him look bad, what with the almost double-digit positive returns he’s put up this year. And so Guy and his fund must go, so that Paulson can devote his full attention to losing money on the strategies he’s supposed to be an expert at exploiting.
“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.
And while he’s clearing out the dead wood around here, it’s time to bid farewell to investor-relations chief Jim Wong, who has had so much less to do these days.
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.