Paolo Pellegrini, the investor who helped hedge-fund manager John Paulson score more than $15bn of profits betting against risky mortgages, is returning money to clients of his own hedge fund after suffering losses this year.

Pellegrini's PSQR Capital has lost about 11% so far in 2010, according to a person close to the matter. The decline included a drop of about 8% in July, after bets against US Treasurys and other moves went awry. The loss has made it more difficult for him to raise cash from investors.