Paulson & Co. Inc. is a hedge fund sponsor owned by its employees and founded in 1994 by John Paulson.[1]
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Paulson & Co. Inc. (PCI) is an employee-owned, hedge fund headquartered in New York, New York. The firm provides services to investment vehicle pools and manages accounts for banking institutions, corporations and pension and profit sharing plans.[2]
PCI is reported to have earned $15 billion with $12.5 billion in assets under management in 2007.[3][4]
In May 2008 PCI bought 50 million shares of Yahoo stock in support of Carl Icahn's proxy fight to replace Yahoo's board[5] and hired former Federal Reserve Chairman Alan Greenspan.
In September 2008, Paulson bet against four of the five biggest British banks including a £350m bet against Barclays; £292m against Royal Bank of Scotland; and £260m against Lloyds TSB.[6][7] PCI is reported to have earned a total of £280m after reducing its short position in RBS in January 2009.[8] In December 2009, the New York Times reported that PCI had profited during the financial crisis of 2007 by betting against synthetic collateralized debt obligations (CDOs).[9] To help protect these bets, PCI and others successfully prevented attempts to limit foreclosures and rework mortgage loans.[10][11]In 2008, PCI started a new fund to capitalize on Wall Street's capital problems by lending money to investment banks and other hedge funds currently feeling the pressure of the more than $345 billion of write downs resulting from under-performing assets linked to the housing market. On August 12, 2009, PCI purchased 2 million shares of Goldman Sachs as well as 35 million shares in Regions Financial.[12] PCI also purchased shares in Bank of America expecting the stock to double by 2011.[13] After the 2007-9 stock market crash, PCI generated $1 billion betting on the recovery of Citigroup.[14]
In November 2009 PCI announced a gold fund focused on gold mining stocks and gold-related investments.[15]
In February 2010, PCI was linked to the restructuring and recapitalization of the publisher Houghton Mifflin Harcourt.[16] The agreement included new equity issued to the senior debt holders one of whom was PCI.[17]On April 16, 2010, PCI was mentioned by the U.S. Securities and Exchange Commission in court fillings when the SEC sued Goldman Sachs and one of Goldman's CDO traders. The allegation was that Goldman Sachs had (mis)represented to its investors that an objective third party (ACA Management) had assembled the mortgage package underlying the CDOs and that Paulson & Co. had a major role in assembling the mortgage package.[18] As a counterparty in the CDO transaction, Paulson & Co. stood to reap great financial benefit in the event of default.[19][20] Paulson & Co was not a defendant in the case.[18] PCI released a statement saying that PCI "is not the subject of this complaint, made no misrepresentations and is not the subject of any charges".[21]
On April 19, 2010, the Wall Street Journal reported that PCI employee Paolo Pellegrini was the point man in PCI's investment in subprime mortgages.[22]
In 2011 PCI was ranked as the world's fourth-largest hedge fund with $35.8 billion in investor assets under management and a 1.22 percent stake in Bank of America.[23]<[24]