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Paloma Partners, the Greenwich-based multi-strategy hedge fund that once helped seed some of Wall Street’s most successful managers, is cutting its portfolio manager teams to about 10. That’s roughly half the number it ran at peak capacity.
For a firm that has backed more than 130 hedge fund managers over its 45-year history, including names like D.E. Shaw, the downsizing is more than a trim.
What happened to the money
Paloma’s assets under management have fallen from around $4 billion to somewhere between $1.1 billion and $1.7 billion. Regulatory filings pegged the number at approximately $1.125 billion as of December 31, 2025.
Returns for 2024 came in at roughly 2.5%.
The fund had already started making cuts earlier in 2026, trimming nearly a dozen staff from strategy and marketing roles after completing a technology and operations overhaul in the first quarter. The portfolio manager reduction announced on July 16 is the more consequential move.
A pivot to conviction over breadth
Paloma is responding by shifting toward what it calls higher-conviction allocations in areas where the firm believes it has a genuine edge.
The two focus areas are fixed income arbitrage and systematic strategies. Both share a common trait: they don’t require massive amounts of capital to work effectively, and they tend to be less susceptible to the crowding problem that plagues popular hedge fund trades.
Legacy and leadership turbulence
Paloma was founded in 1981 by billionaire Donald Sussman, and for decades it operated as something of a talent incubator for the hedge fund industry, backing more than 130 hedge fund managers including D.E. Shaw and Elliott Management.
Leadership transitions haven’t helped stability. The firm saw the brief tenure of former CEO Neil Chriss, followed by Ravi Singh taking the reins.
The technology and operations overhaul completed in early 2026 was meant to modernize the firm’s infrastructure and reduce costs. The PM team cuts are the firm’s attempt to address the performance side of the equation directly.
What this means for investors and the broader hedge fund landscape
For allocators evaluating mid-tier multi-strategy funds, Paloma’s trajectory is a cautionary data point. A drop from $4 billion to roughly $1.1 billion represents a redemption cycle that feeds on itself: withdrawals force portfolio adjustments, which can hurt returns, which trigger more withdrawals.
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