Clients of hedge fund firm Paulson & Co have been told by eponymous founder John Paulson that its two Advantage funds, with a total of about $20 billion under management, will close later this year, an investor has informed the Financial Times.

The FT comments that managers usually stop accepting new money when they think an increase in size of the funds might impact adversely on their ability to produce good returns. A number of fund firms, such as Brevan Howard and Lansdowne Partners, have shut funds to new investors, the publication said.

John Paulson has been at the centre of a storm of controversy surrounding an alleged scandal at Goldman Sachs. He chose the securities, that he intended to short-sell, for a collateralized debt obligation that Goldman Sachs sold to investors. Goldman has denies the charge, made by the SEC, that it sold the CDO without informing investors of Paulson's involvement.