Many of Paulson & Co.'s investors hung with it last year despite an annus horribilis in which the company's flagship hedge fund lost 35 percent. But with returns continuing to sag amid a rising equities market, some of those investors are now jumping ship.

John PaulsonCitigroup (C) announced last week that it was pulling Paulson off its hedge-fund investment platform and planned to take back $410 million in assets.

Morgan Stanley's (MS) brokerage firm has reportedly had the fund company on watch for possible removal from its hedge-fund platform for months now. And other investors big and small are considering redeeming their capital soon as well, say bank officials and fund of funds managers.

During a phone call with clients and employees of Bank of America late Tuesday, Paulson & Co. founder John Paulson said he was “disappointed” about the loss of Citigroup as an investor, according to someone briefed on the call, but noted that the bank’s platform accounted for less than 2 percent of his company’s overall investments. Paulson also said that he wanted to “reaffirm” his commitment to the flagship fund and the “entire business,” this person added.

Still, the investor scrutiny comes at a sensitive time for the money manager.

These developments come at a difficult time for John Paulson, the former Bear Stearns banker who opened his eponymous hedge fund eighteen years ago. (Read More: After Slow Summer, Market Will Heat Up in September)

Paulson has gone from managing more than $38 billion in assets at his company's peak to $19.5 billion today. And while a number of his funds are up this year - including the merger fund, which is up 3.6 percent, and the recovery fund, which is up 3.9 percent - his flagship funds, which consist of holdings that represent an array of different strategies, continue to suffer.

Even worse has been Paulson’s gold fund, which he acknowledged during the BofA call as the worst-faring in his portfolio so far this year. But given the tumult in Europe, which the fund-company founder thinks could benefit the yellow metal, Paulson remains bullish on gold over the next five years, according to the person briefed on the call. (Indeed, the Bank of America executive who led the call described Paulson’s funds as a great way to play the “gold miner thesis,” this person added.)

So far this year, Paulson's main flagship fund, known as Paulson Advantage, is down about 13 percent, according to people familiar with the matter, and its levered sibling, Paulson Advantage Plus, is down 18 percent. And while the so-called redemption window - the moment at which investors can pull back, or redeem, their capital from a hedge fund - varies for Paulson investors according to which fund they are in and when they invested, the protracted slump in the flagship funds is prompting hard looks at investor portfolios. 

"Given the success he had, [Paulson] is going to have a longer leash than other managers. But at some point, every investor has to decide to lock away if they don't see it coming again," said Nick Bollen, a professor of finance who studies hedge funds at Vanderbilt University's Owen Graduate School of Management. (Read More: John Paulson Buys Saudi Prince's $90 Million Aspen Palace.)

Even though Paulson performed phenomenally well during the credit crisis, Bollen added, "there's no assurance that he'd be able to make similar timely calls in the future."

One fund of funds manager who redeemed investor money from the Advantage fund during its downturn last summer said he thought that Citigroup was simply late to recognize a plummeting investment, and that the bank should have fired Paulson months ago.

Still, other investors said it made little sense to redeem their money even after the losses of 2011, given that Paulson is now so far below his high-water mark - the asset level at which he must stay in order to charge fees to his investors - that he is now essentially managing their money for free.

In addition, added a second fund of funds manager, pulling Paulson off a platform like Citigroup's is problematic because it runs the risk of locking in losses, rather than letting clients who still like Paulson's funds to remain involved and potentially enjoy future upside returns.

"Clearly, [Paulson] has not performed well," said the money manager.

"We'll certainly discuss the pros and cons with our clients prior to the [next] redemption date," he added, which, in his case, would be the end of this year.

Paulson investor redemption windows vary according to individual fund and the timeframe of the original capital inflows. Some Advantage investors, for instance, are on quarterly redemption time frames, while others are on semiannual or even annual ones. In all cases, investors must provide 60 days' notice if they want to pull out their money.

While Citigroup has already closed Paulson funds off to new investors, its redemptions will play out over a yearlong period that begins in March 2013, said someone familiar with the matter.