More than perhaps any other investor, John Paulson has been lauded for his foresight in predicting a quick and painful end to this decade’s mortgage boom. And the hedge fund manager has been rewarded handsomely for his big bets.
Mr. Paulson, who runs the hedge fund Paulson & Company, began betting against subprime mortgages as early as 2006, setting up two funds focused for that purpose. At the time, the bet seemed highly contrarian: Big firms like Merrill Lynch and Citigroup were gorging on enormous profits by packaging and trading blocks of risky home loans.
And Mr. Paulson himself was a relative unknown. A native of Queens, he was a former banker at Bear Stearns before forming his own hedge fund in 1994.
But by the time the housing market began to slump in 2007, Mr. Paulson’s pessimism seemed well founded. The housing crisis led to a near-cratering of the mortgage market, forcing hundreds of billions of dollars in losses at major investment banks.
It also precipitated the sales of Countrywide Financial, the big mortgage lender, and Bear Stearns, his former employer and the investment bank that drew much of its profits from trading in subprime-backed securities.
Paulson & Company’s performance in 2007 was estimated to be the best of any hedge fund, according to several publications. And according to Institutional Investor’s Alpha magazine, Mr. Paulson himself made $3.7 billion, probably the richest bounty in Wall Street history.
And in a surprising twist, Paulson & Company was reported in January 2008 to have hired Alan D. Greenspan, the former Federal Reserve chairman, as an adviser. — Michael J. de la Merced, April 16, 2008
ARTICLES ABOUT JOHN PAULSON
Dreams of riches still live at hedge funds and private equity firms.
September 28, 2008
At the 2008 Robin Hood Foundation benefit, hedge fund managers donated $56.5 million to charity. But many of the market wizards are making less these days and they are giving away less, too.
May 29, 2008
For 15 years through 2005, Bill Miller’s investments handily beat stock market averages. But for the last two years, the market has handily pulverized him.
May 11, 2008
Short sellers are drawing fire once again, being accused of spreading rumors, persecuting companies and unsettling entire economies.
April 30, 2008
Many of the wealthiest hedge fund managers are lining up behind a seemingly unlikely choice in the presidential race.
April 22, 2008
Hedge fund managers are making money on a scale that once seemed unimaginable, even on Wall Street.
April 16, 2008
George Soros has always been a controversial figure. But he is becoming more so with a new, dire forecast for the world economy.
April 11, 2008
Through the first nine months of 2007, three hedge fund managers had made more than $1 billion.
January 5, 2008
In New York City’s frantic real estate market, the latest objects of desire are mansion-size properties that range in price from $15 million to $20 million.
March 17, 2005