Paulson & Co. has created what it calls a “side-by-side” management arrangement in which the firm conducts its flagship trading strategies through two separate sets of funds, according to a March regulatory filing.One group serves as proprietary trading vehicles for the 63-year-old founder; the other holds outside capital as well a smaller portion of Paulson’s money.

The restructuring would enable Paulson to eventually spin off the outside funds to employees, a scenario he briefly mentioned during a January podcast. While Paulson scored huge profits during the 2008 U.S. housingcollapse, investment losses and customer defections in recent years dragged the firm to less than $9 billion as of November from a peak of $38 billion in 2011.

“It’s a very natural thing to change your business model, often to a family office, when your assets have shrunk dramatically,” said Richard Klitzberg, who helps hedge fund and private equity managers raise capital. “The business of running money for other people, all of its rewards considered, is an enormous burden.”

Paulson said in an emailed statement that his firm “continues to manage outside money in addition to partner capital,” adding that the New York-based advisory “has been a hybrid family office for some time.” He also noted that Paulson & Co. continues to raise and grow assets in its external funds, saying all of these vehicles are “generating positive returns” year-to-date. […]