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Morning Brief: John Paulson Is Shutting Down His Long-Short Fund

Paulson is said to be moving back to his roots in merger arbitrage.

More woes for John Paulson’s Paulson & Co. The once-gilded hedge fund firm that made its name and fortune betting against sub-prime mortgages ahead of the financial crisis is shutting down its long-short equity fund, according to Bloomberg. The two-year-old fund, headed by Guy Levy accounts for just 5 percent of the firm’s assets. It was up 9.5 percent this year through May after losing money in 2016, according to the report. “We are re-focusing the funds on our core areas of expertise in merger arbitrage and distressed credit, where our assets have been growing,” said John Paulson in a letter to investors, according to the wire service. “We thank the long-short team for their efforts on behalf of the company.”

Paulson is said to be moving back to his roots in merger arbitrage. Paulson currently manages about $10 billion, including $2 billion of client money. It managed a total of $38 billion at its peak in 2001. In addition, Jim Wong, the firm’s head of investor relations is leaving after 14 years, according to the report. He will be succeeded by Tina Constantinides, who has been with Paulson for 13 years.

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Shares of Facebook, the most widely held hedge fund stock, rose nearly 3 percent to close at $170.44 after the social media giant reported mostly very strong results for the second quarter. In response, several investment banks raised their price targets on the stock. For example, Credit Suisse Group lifted its target to $190, from $180. In a note to clients, the bank said the quarter’s results signal strong upside potential in the second half of the year and “should drive greater urgency among investors” to add to their Facebook positions. Its end of 2018 target price was also raised, to $235 from $220. The notes one caveat: “Slower-than-expected advertiser adoption either on a product-by-product or regional basis for Facebook’s various ad units is a risk to our estimates.”

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Wexford Capital LP participated in the series B preferred stock financing of Shape Memory Medical, which is developing multiple therapies for embolization. Wexford, which had previously invested in the company, manages more than $2 billion in three hedge funds. It was founded by Charles Davidson and Joseph Jacobs.

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Point72 Asset Management disclosed that as of July 25 it nearly quadrupled its stake in Achaogen to 5.5 percent of the late-stage biopharmaceutical company. Point72 is the family office of Steven Cohen.

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