Paloma cuts teams, refocuses on fixed-income arbitrage

Paloma Partners is cutting about half of the portfolio manager teams it backs, reducing the number to roughly 10, and trimming quantitative staff as it narrows its strategy mix. The firm plans to focus on short-duration G7 government bond arbitrage, convertible bond arbitrage, relative-value credit and systematic futures trading.

In a recent letter to investors, founder and principal Donald Sussman outlined the reorganization and noted that several underperforming teams had offset gains elsewhere in the portfolio. The letter said the firm reassessed whether some quantitative approaches can still produce attractive excess returns in a more crowded market and identified lower-capital, lower-cost strategies as the priority.

Regulatory filings show Paloma managed about $1.1 billion at the end of 2025, down from roughly $4 billion in 2023. People familiar with the firm’s performance reported a return of about -3% for the first half of 2026. The investor letter stated Paloma will waive management fees for at least two years while the revised platform works to rebuild returns; investor liquidity terms will remain unchanged.

Paloma hired former Credit Suisse executive Ravi Singh as chief executive in 2024 and brought in Mike DeAddio, the former chief operating officer of WorldQuant, to upgrade its operating infrastructure. The firm also explored bringing in a large institutional strategic investor to support the next phase of its business.

Founded in 1981, Paloma provided early backing to several investment firms, including initial support for DE Shaw and later investments in LMR Partners and Sona Asset Management. The reorganization shifts the business from a broad multi-manager model toward a more concentrated platform built around strategies the firm expects to run with less capital and lower operating costs.

The changes occur while the largest multi-strategy firms operate with dozens of teams and make substantial investments in technology, data and recruitment. Those scale factors have affected how some smaller multi-strategy managers allocate capital and resources.