Citigroup Inc. (NYSE:C) hung in for a while, but recent losses in the hedge-fund portfolio of John Paulson were too much to bear, and the company’s private bank will, beginning in March, pull assets from Paulson’s hedge funds that currently total more than $400 million, according to sources.
Citigroup Inc. (NYSE:C) has about $2 billion in money from high-net-worth clients invested in about 60 hedge funds, according to sources, and the bank had put Paulson’s hedge funds on a “watch list” in April – meaning that the firm would make no new investments going forward – due to heavy losses in the first quarter of 2012. But by the end of July, one of the hedge funds had dropped 18 percent in value since the first part of the year, and a $35 billion portfolio at the start of 2011 was down to about $19.5 billion in 18 months.
Paulson received acclaim five years ago when he made $4 billion on bets that the housing bubble would burst, at one time ran oen of the most valuable hedge fun portfolios at $36 billion. But he has been on a losing streak the last couple of years, despite some optimistic comments. “I think we’re back on track,” he said in June, “and I’m actually quite excited about our portfolio.”
While Citigroup Inc. (NYSE:C) has made its intention to leave known, Paulson & Co. representatives have said they have received no redemption requests from any other large institutional investors – such as Bank of America Corporation (NYSE:BAC), and in fact insists that the firm is still receiving new purchase orders and new interest at a similar rate as in the past.