The Advantage Plus fund, managed by Paulson & Co., has lost 18% this year, while the Advantage fund has fallen 13%. On average, hedge funds have risen 2.88% this year.
As the funds’ performance lagged throughout the year, Citibank placed them under review, joining Morgan Stanley (NYSE:MS), which has also put Paulson funds on a watch list and warned customers against investing in them.
Paulson, who made his reputation with savvy investments exploiting the mortgage crisis, stumbled last year as the economy remained stagnant. His Advantage Plus and Advantage funds, dropped precipitously in 2011, falling 52% and 36%, respectively.
Those funds remain down this year. Paulson’s Recovery Fund and merger arbitrage fund have both posted single-digit gains this year.
However, sources say Citibank will also withdraw money from the merger and Recovery funds, despite those gains.
Representatives of both Citibank and Paulson & Co. had no comment on the reports.
Shares of Citigroup slipped fractionally in early Friday trading.