Morgan Stanley Drops Paulson Funds, Encourages Redemptions

Dec 20 2012 | 10:49am ET

Morgan Stanley is dropping two Paulson & Co. hedge funds from its hedge fund platform.

Paulson's Advantage and Advantage Plus fund—which lost 36% and 51%, respectively, last year, and which are on their way to another double-digit loss this year—count about $100 million in Morgan Stanley client money among their roughly $5.7 billion in total assets. The bank cited the aforementioned poor performance for its decision, CNBC reports.

Morgan Stanley Wealth Management, which put the funds on watch in May, told its financial advisers on Tuesday that it had changed the funds' status again, this time to redeem. The advisers were told to suggest their clients pull their money from the funds.

Despite Morgan Stanley's decision to place the funds on watch and their continued poor performance, the redeem move was not expected, according to CNBC. Advantage is down more than 17% this year, and Advantage Plus more than 20%.

Morgan Stanley's move follows a similar decision by Citigroup in August. It does not affect other Paulson funds available on the Morgan Stanley platform.


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