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Paulson Eyes New Hedge Fund for Tax Exiles

Wounded by huge losses and some staggering tax bills, Paulson eyes new fund to help other tax victims. Plus, funds attract $11B in February and the SEC seeks a hedge fund budget boost.

While Congress debates what to do about background checks for new gun purchases and North Korea reminds the world what a true maniac with a nuke looks like, the financial news was more predictable. That said, there was some intriguing news for hedge funds.

After considering moving to Puerto Rico to lower his tax bill, billionaire hedge fund manager John Paulson is launching a hedge fund to help investors pay the Uncle Sam even less. (Charming, no?)

Did you get Paulson’s invitation to his April 24th event at Paulson and Co’s offices to hear about Paulson Partners Premium LP Fund? Bloomberg describes it as "risk-arbitrage fund for investors looking to mitigate income taxes." According to the invitation Bloomberg found, the 75-minute event will feature "a 15-minute discussion of tax-deferred or tax-free investing in the fund."

[Looking for speed? The CME Group and Nasdaq OMX have a new superfast HFT link.]

Paulson's competition are not impressed, of course. "He seems to be more focused on avoiding income taxes than on generating returns for his investors," says Brad Alford, head of Atlanta-based Alpha Capital Management LLC, who runs a mutual fund of funds that invests in hedge funds. “It gives billionaires a bad name.”

In Other Hedge Fund News

Hedge funds attract $11B in February: Hedge funds may have had a terrible 2012, but the first few months of 2013 have been hot, hot, hot. Hedge funds took in a net $11.4 billion in February, and inflows of $4.3 billion in January, according to data of 3,434 funds from BarclayHedge and TrimTabs Investment Research.

"The hedge fund industry continues to struggle with performance," says Sol Waksman, president and founder of BarclayHedge. "The industry delivered a return of 0.4 percent in February, less than half of the S&P 500’s 1.1 percent rise. In the past 12 months, hedge funds earned 5.8 percent, while the S&P 500 rose 10.9 percent."

Obama’s SEC budget targets hedge funds: The Obama administration wants more money for the Securities and Exchange Commission (SEC) so it can improve how it monitors hedge funds and private-equity firms.

The White House's budget request comes after hundreds of hedge-fund managers and private-equity managers were required to come under SEC oversight, stemming from a 2011 rule that required big funds to register with the agency.

[What’s faster than HFT? Jamie Dimon scrambling to keep his CEO-Chairman role at JPMorgan.]

The request noted that during during 2012, the SEC examined only about 8 percent of of fund managers registered with it. Also, more than 40 percent of fund managers registered with the SEC have never been examined. To reverse this trend, the SEC wants to hire 250 more examiners.

And they need them! The SEC oversees about 11,000 investment advisers, including hedge funds and private equity shops, as well as 9,700 mutual funds and exchange-traded funds, reports MarketWatch.

Phil Albinus is the former editor of Advanced Trading and he currently edits the FierceFinanceIT newsletter. Follow him on Twitter at @philalbinus.

Phil Albinus is the former editor-in-chief of Advanced Trading. He has nearly two decades of journalism experience and has been covering financial technology and regulation for nine years. Before joining Advanced Trading, he served as editor of Waters, a monthly trade journal ... View Full Bio

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