Hedge-fund guy EARNS? $5billion last year. America’s money definitely goes to a select few.John Paulson personally netted more than 5 billion dollars in profits in 2010-likely the largest one-year haul in investing history exceeding the nearly $4 billion he made with his bets against sub prime mortgages in 2007.He’s not the only one.Appaloosa Management founder David Tepper and Bridgewater Associates chief Ray Dalio each personally made between $2billion and $3billion last year.
Mr. Paulson and the other top managers seldom take much of their profits in cash.After all, where would they put all that money.Some of the profits are so-called paper gains, which reflect the rising values of their firms holdings, and could erode if those investments sour.Other gains come from selling investments, and most of those are rolled back into their funds.They made winning bets on commodities, emerging-market companies, bank shares and U.S. Treasury bonds, among other investments.
Assets managed by hedge funds have grown to a near-record high of $1Trillion, up 20% over the past year.Assets jumped almost $150 Billion in the fourth quarter alone, the largest quarterly growth on record, according to Hedge Fund Research, Inc.Their personal gains came in part from the sheer scale of assets under their control.The largest hedge fund in Mr. Paulson’s $36 Billion investment portfolio, Advantage Plus, grew 17% last year.
Mr. Paulson created profits for himself and many of his investors in a novel way.He was worried about long-term weakness of the dollar and other major currencies, so he devised a way to place a bet on gold into each of his funds-for those investors who opted for that approach.He has placed the bulk of his own wealth in these gold-dominated funds. Because gold rose sharply in value last year, the gold-dominated versions of his funds rose as much as 45%.He has so much money in the game he can pretty much dictate what the market will do.And with Obama’s lack of taxation on the rich law, he gets to keep most of his money.No wonder people are storming the American border every day.For some, there is a lot of money to be made here that stays in your pockets.