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Hedge Funds

Paulson & Co. founder may leave hedge funds behind to start family office

Billionaire John Paulson said publicly for the first time he may convert his hedge fund into a firm that solely manages his fortune, joining other high-profile names who made the change.

Mr. Paulson, 63, said he will probably make a decision over the next couple of years. He may run a hybrid business, with one part managing his money and the other running client capital with a profit-sharing arrangement with his partners, Mr. Paulson said in an interview on Mike Samuels' "According to Sources" podcast.

His namesake hedge fund managed about $8.7 billion at the start of November. About 75% to 80% of its money is Mr. Paulson's, he said on the podcast released Monday.

For years, speculation has been rife that Mr. Paulson would fold his struggling hedge fund and just manage his own wealth. Paulson & Co.'s assets have slumped from a peak $38 billion in 2011 after wagers went awry and investors fled. The money manager, who minted a fortune by betting against the U.S. housing market more than a decade ago, early last year returned money to clients from some funds and cut senior employees. At the time, people close to Mr. Paulson said he didn't have plans for a family office and was instead overhauling his business so he could return to his roots of betting on mergers.

Separately, Mr. Paulson in November said he is considering becoming a resident of Puerto Rico in the next few years once his teenage children go to college.

Family offices, which manage the fortunes, tax affairs and often lifestyles of the wealthy, have been around for centuries, with the Rockefeller family setting up one of the earlier versions. They have proliferated in the past two decades, driven by Silicon Valley entrepreneurs and an explosion of wealth in Asia.

There are probably more than 5,000 family offices globally, according to Campden Wealth. Hedge funds also have been a source for new family offices as clients pull their money following years of mediocre performance, leaving managers to run just their own capital. Last year, Leon Cooperman and Alan Fournier were among the managers who said they would convert their firms into family offices.