Washington Post- The subprime crisis that has caused so much trauma for hedge funds and investment banks has brought only good news for John Paulson. He is the manager of more than $7 billion in hedge fund money keyed to mortgage credit.
Paulson started warning his investors back in the middle of 2006 that the frenzy to build and sell housing was a bubble about to pop. His firm, Paulson & Co. of New York, made big bets predicting the edifice would soon come crashing down. The wager paid off in the first nine months of 2007, when Paulson’s Credit Opportunities funds rose an average of 340 percent.
That gain earned Paulson an estimated $1.14 billion in performance fees for the nine months ended Sept. 28. Fees on Paulson’s other eight funds bring his total to $2.69 billion, which puts Paulson and co-manager Paolo Pellegrini at the top of Bloomberg’s ranking of best-paid hedge fund managers.
Paulson’s earnings from his hedge fund bets were three times those of the better-known Kenneth C. Griffin, chief executive officer of Citadel Investment Group in Chicago. His firm manages $16 billion and earned performance fees of $837 million for the first nine months of 2007. Griffin has thrived by buying up distressed assets.
