John Paulson made billions of dollars anticipating the 2008 financial collapse. But after running into difficulties in recent years, Mr. Paulson will convert his hedge fund firm into a private investment firm that runs only his family’s money. Mr. Paulson’s decision to hand his investors’ their cash back and turn his firm into a family office has been long telegraphed as assets at his firm have fallen and returns declined. He had a strong year last year, in which his key merger hedge fund rose nearly 30%. But the fund is...