John Paulson earns $5 bn by betting on gold
John A. Paulson made $4 billion betting against newfangled mortgage investments. But he made even more betting on an old-fashioned investment: gold.
Paulson, a hedge fund manager who sprang to fame when the housing market collapsed, personally made about $5 billion in 2010, according to two investors in his company.
How? Paulson bought gold lots of it. His firm, Paulson & Co., owns securities that represent the rough equivalent of 96 metric tons of the metal.
It is an outsize wager by almost any standard. Paulsons firm does not actually own all that gold. But if it did, it would be sitting atop more gold than the Australian government. Paulson himself would be holding more gold than Bulgaria.
Paulson is known for betting big. His payday for last year exceeds the $4 billion he made for 2007. He became one of the most celebrated hedge fund managers in the business after his firm shorted subprime investments.
The 2010 income, which was first reported by The Wall Street Journal, was the culmination of a remarkable comeback for Paulson last year.
While Paulsons firm oversees about $36 billion of assets in a range of hedge funds, the bulk of his personal fortune is invested in his funds that buy securities linked to the price of gold. Gold jumped almost 30 percent in 2010. So far this year, however, it has fallen almost 6 percent.
While some other hedge-fund stars turned in strong performances last year Appaloosa Managements David Tepper, Third Points Daniel Loeb and Pershing Squares William A. Ackman, for instance Paulsons payday most likely dwarfed theirs, as he oversees funds that are substantially bigger.
Throughout much of last! year, P aulsons funds lagged the market. Amid questions about whether the funds had become too big to beat the markets or whether Paulson had lost his touch, some investors asked for their money back midyear.
But those who stayed were rewarded. In the final quarter of the year, many of Paulsons core stock holdings rose substantially. His two largest funds, with a combined $18 billion in assets, the Advantage and Advantage Plus fund, were up 11.6 percent and 17.6 percent by the end of the year. (The difference between the two funds is that the Advantage Plus fund uses leverage, or borrowed money, to increase its returns.)
The average hedge fund gained a little more than 10.5 percent in 2010, a lukewarm year for many hedge fund managers, according to a composite index tracked by Hedge Fund Research of Chicago. Many investors would have seen bigger gains by putting their money in an index that tracked the Standard & Poors 500-stock index, which was up about 15 percent last year, including dividends.
Paulson, a hedge fund manager who sprang to fame when the housing market collapsed, personally made about $5 billion in 2010, according to two investors in his company.
How? Paulson bought gold lots of it. His firm, Paulson & Co., owns securities that represent the rough equivalent of 96 metric tons of the metal.
It is an outsize wager by almost any standard. Paulsons firm does not actually own all that gold. But if it did, it would be sitting atop more gold than the Australian government. Paulson himself would be holding more gold than Bulgaria.
Paulson is known for betting big. His payday for last year exceeds the $4 billion he made for 2007. He became one of the most celebrated hedge fund managers in the business after his firm shorted subprime investments.
The 2010 income, which was first reported by The Wall Street Journal, was the culmination of a remarkable comeback for Paulson last year.
While Paulsons firm oversees about $36 billion of assets in a range of hedge funds, the bulk of his personal fortune is invested in his funds that buy securities linked to the price of gold. Gold jumped almost 30 percent in 2010. So far this year, however, it has fallen almost 6 percent.
While some other hedge-fund stars turned in strong performances last year Appaloosa Managements David Tepper, Third Points Daniel Loeb and Pershing Squares William A. Ackman, for instance Paulsons payday most likely dwarfed theirs, as he oversees funds that are substantially bigger.
Throughout much of last! year, P aulsons funds lagged the market. Amid questions about whether the funds had become too big to beat the markets or whether Paulson had lost his touch, some investors asked for their money back midyear.
But those who stayed were rewarded. In the final quarter of the year, many of Paulsons core stock holdings rose substantially. His two largest funds, with a combined $18 billion in assets, the Advantage and Advantage Plus fund, were up 11.6 percent and 17.6 percent by the end of the year. (The difference between the two funds is that the Advantage Plus fund uses leverage, or borrowed money, to increase its returns.)
The average hedge fund gained a little more than 10.5 percent in 2010, a lukewarm year for many hedge fund managers, according to a composite index tracked by Hedge Fund Research of Chicago. Many investors would have seen bigger gains by putting their money in an index that tracked the Standard & Poors 500-stock index, which was up about 15 percent last year, including dividends.
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