Paulson & Co’s Advantage Fund And Feeder Funds Sold By Morgan Stanley, UBS Financial, Citigroup And Merrill Lynch Over Losses


Zamansky is investigating Paulson & Co.’s (“Paulson”) Advantage and Advantage Plus hedge funds (the “Funds”) as well as related feeder funds sold by major brokerage firms such as Morgan Stanley, Citigroup, UBS Financial and Merrill Lynch, over their losses.  Paulson’s Advantage and Advantage Plus fund—which lost 36% and 51%, respectively, last year in 2011, are reportedly on their way to another double-digit loss this year.  As a result, in May 2012, Morgan Stanley Wealth Management had put the Funds on its “watch” list, and now is advising customers to redeem.  Citigroup made a similar decision back in August 2012.

Many investors purchased the Paulson Funds through feeder funds sold by many of the major Wall Street brokerage firms such as Morgan Stanley, Citigroup, UBS Financial Services and Merrill Lynch.  The feeder funds have various names such as UBS Paulson Advantage Fund, LionHedge Paulson, Paulson Advantage Access Fund, Morgan Stanley HedgePremier Paulson, and CAIS Paulson.  These feeder funds all invest in Paulson’s Funds, oftentimes representing to investors that they provide due diligence or oversight over the Funds which is not necessarily true.

The Funds’ continued losses, as well as the losses suffered by the feeder funds, raise serious questions for investors.  First, earlier this year, Paulson and the Funds were sued by an investor over the disastrous investment in Sino Forest which resulted in a reported loss of $460 million.  Sino Forest was accused of running a “multi-billion dollar Ponzi scheme” by analyst Muddy Waters, and submitted to its own fraud investigation.  An Independent Review Committee subsequently verified many of the accusations by Muddy Waters, and Sino Forest recently filed for bankruptcy. In the lawsuit, Paulson and the Funds were charged with breach of fiduciary duty by investing so deeply into Sino Forest without sufficient due diligence.

Zamansky is investigating the Fund over other errors like “Sino Forest” that have not yet been revealed, and is investigating the many Paulson feeder funds sold by Morgan Stanley, Citigroup, UBS Financial and Merrill Lynch.   The continued losses by the Fund and Feeder Funds raise issues over whether the investment was suitable for, and the risks properly disclosed to, investors by their financial advisors at Morgan Stanley, UBS Financial, Merrill Lynch and Citigroup.  Investments in private hedge funds are high risk, speculative ventures that should only be entered into by persons wealthy enough and sophisticated enough to appreciate the risks.  Often, hedge funds are sold to investors who are not able, willing or knowledgeable enough to make the investment.   Firms like Morgan Stanley, UBS Financial, Merrill Lynch and Citigroup, which sold “Paulson”  or “Paulson Advantage” feeder funds also may have had due diligence and supervisory obligations that were breached.

If you were an investor in the Paulson Funds, or any of the feeder funds such as the UBS Paulson Advantage Fund, LionHedge Paulson, Paulson Advantage Access Fund, Morgan Stanley HedgePremier Paulson or  CAIS Paulson sold by a brokerage firm, and wish an evaluation of your situation, please contact Jake Zamansky at 212 742-1414, jake@zmansky.com.