Trader John Paulson
John Paulson is a dark horse in the world of investing and hedge funds, but it was he and his fund that managed to make the largest capital during the 2008 crisis, outperforming such market tycoons as Soros and Buffett.
After all, when the mortgage market collapsed and the inflated bubble burst, John made over $15 billion. Paulson managed to make money where everyone else had lost, fueling numerous rumors of government patronage and insider trading.
However, even after the crisis, John Paulson maintained the fund's returns at a very high level, earning huge amounts of money for his investors.
Many people look for mysticism in Paulson's life, when in fact the secret to his success was his determination, which allowed him to earn enormous sums of money.
Paulson's love of the stock market was instilled in him by his father, who provided him with the money to buy stocks starting at age 14. His first shares were LTV, which John purchased for $66.
Within a short time, the company went bankrupt, and its share price fell to $3. However, Paulson was in no hurry to divest himself of the unprofitable asset, and by the time he graduated, his net worth had reached $18,000.
Thanks to the company's debt restructuring, the share price not only returned to its previous price, but also reached new heights.
Education and career
After graduating from high school, John enrolled in a local college, but at the age of 19, he dropped out to try his hand at business. John's success allowed him to accumulate a sizable start-up capital, and he sold his children's clothing business to the successful Bloomingdale's.
After selling the business, he finished college and then enrolled in a New York university's management program. After graduating, two years later, in 1980, John entered Harvard Business School and earned an MBA.
After graduating, John joined the financial firm Odyssey Partners, and then spent a long time as a bank manager at Bear Stearns. However, the crisis caught up with the huge bank, forcing it to undergo a takeover, and John was forced to leave his position.
Own fund
Having gained extensive experience as a bank manager and become far from poor, John Paulson, at the age of 39, founded his own hedge fund with $2 million in capital. As Paulson himself recalls, he had to send out his investment proposal to 500 different companies.
However, fundraising was very slow, and the fund practically existed for a whole year without investor support.
A successful year of work boosted not only the relatives' capital but also that of the initial investors. Thus, the successful years of 2001 and 2002 brought in $300 million, and by the end of the famous 2006, the fund's capital amounted to over $6 billion.
In fact, this capital growth was achieved thanks to the company’s successful and stable long-term profitability.
A crash that brought great wealth
In early 2006, John Paulson ordered two of his subordinate analysts to investigate the mortgage market. Seeing the weakness in the mortgage market, Paulson began selling government bonds and managed to earn over $15 billion in 2007.
After making huge profits during the mortgage crisis, the hedge fund's capital grew to $38 billion, becoming one of the top four companies by capital. Following the crisis, John Paulson began actively acquiring banking sector shares whose companies were subject to debt restructuring.
A smart approach to undervalued stocks with huge potential allowed the fund to grow its capital by more than 20 percent. In terms of mistakes, the fund recorded a 24 percent loss at the end of 2011 due to the European crisis.
However, this loss did not stop Paulson, and the Paulson&co hedge fund continues to operate to this day.
