Paolo Pellegrini, the former Paulson & Co. portfolio manager credited with the hugely successful subprime mortgage investment strategy that put that firm on the map, plans to return outside capital in his hedge fund, just 10 months after opening that vehicle to investors.
Pellegrini told investors that he would return their money by the end of next month. The PSQR Capital founder, who opened the PSQR Master Fund to investors in December building up an impressive two-year track record, said he would continue to manage his own money through the fund, AR magazine reports.
In a letter to investors today, Pellegrini said he decided to stop managing outside money because of the “additional work” required on the fund due to his bearish outlook on the economy.
So far, that strategy has not proven nearly as profitable as the one that helped earn Paulson triple-digit returns in 2007. The PSQR fund lost 3.16% in the first half.
“While my views on global economies haven’t changed, I’ve concluded that substantial additional work is required to position the Fund to profit consistently from those views,” Pellegrini wrote. He said that, if he accepts outside capital into the fund again, he would honor current investors’ high-water marks.
According to AR, it is unclear what will become of PSQR’s staff.
Pellegrini launched PSQR in April 2008, and returned 40% that year and 61.6% last year.