Citi To Pull $410 Million From Paulson

Aug 24 2012 | 1:12pm ET

Citigroup's patience with Paulson & Co. is at its end.

The firm's private bank will redeem about $410 million from Paulson's flagship hedge funds, which posted double-digit losses last year and are on pace to do the same again this year, and two other hedge funds The Citi withdrawal amounts to more than 2% of the New York-based hedge fund's $19.5 billion in assets.

Citi's decision comes three months after it put Paulson on its watch list, making it ineligible to get any new money from the private bank for three months and warning clients not to add any new money. Paulson has long enjoyed a steady stream of new capital from bank hedge-fund platforms.

Morgan Stanley also put Paulson on watch at the time; it is unclear whether it plans to dump the hedge fund, as well.

Paulson's Advantage and Advantage Plus funds were available on the Citi platform. The latter, a more highly-levered version of the former, lost 51% last year and is down 18% this year. The firm's Merger and Recovery funds were also on the platform.

Citi's redemptions will begin between March of next year and March 2014.

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