John Paulson is making some big structural changes as his hedge fund is set to return the worst performance of his money management career to investors who saw him earn 590% in 2007.
The changes include the following: the firm won’t charge fees on money it raises until Paulson & Co returns a profit on their investment to new investors. And Paulson Advantage is reducing its leverage from 1.5X Paulson Advantage to 1.15X Paulson Advantage.
And now the firm is changing how it pays employees bonuses. For some time Paulson had structured bonuses to vest over a four-year period, according to Reuters. Four years ago Paulson had his biggest year, so that bonus-pay structure might have had them earning a big chunk of their huge 2007 bonuses this year.
But it sounds like that structure has changed a bit, so that employees will instead receive their 2011 bonuses this year.
Some of Paulson’s employees — whose money has been locked up for years — will receive the final instalment of their bonus for 2008 this year, say people familiar with the hedge fund.
[The four-year hold up] has been scrapped this year so that bonuses for 2011 — a year where Paulson’s flagship Advantage Fund is off 32% and its Advantage Plus cousin is down 47% — would be paid immediately.
We’re not sure if that means that employees are not getting their bigger, vested bonuses, this year, but if so, it can’t make employees happy, but it will certainly keep them employed at Paulson. A recruiter told Reuters that they haven’t seen any resumes come in from Paulson.