Paulson & Co. will shut down its two-year long and short strategic equity fund. As assets shrunk sharply, the investment firm, which became famous for betting on the collapse of the US real estate market, decided to change its strategy.

“We are adjusting the business focus of our funds and refocusing on core areas where we are good at, such as merger arbitrage and bad credit. In these business areas, our assets have continued to grow,” Paulson stated as above in a letter to investors from company founder John Paulson seen by Bloomberg News. “We appreciate the efforts of the Long and Short team for the company.”

According to the letter, the fund, led by Guy Levy, manages about 5% of Paulson & Co.'s assets under management. The fund focuses on health insurance and pharmaceuticals -- one of Paulson's biggest losses recently. According to people familiar with the matter, although the fund declined in 2016, it made money this year. As of May this year, the fund is up 9.5%, according to Bloomberg's report last month.

But now, after a series of misguided decisions led to a sharp decline in assets, Paulson, who founded this merger-focused arbitrage company in 1994, has decided to go back to basics. Since the end of 2015, the company's assets have shrunk by $6 billion, Bloomberg reported in June. Of the $10 billion in assets managed by the company, about $2 billion is client capital, and most of the rest is Paulson's own wealth. For Paulson & Co., this is an amazing reversal -- at its peak in 2011, the company managed $38 billion in assets, half of which came from outside investors.