Established by John Paulson in 1994, Paulson & Co. is a hedge fund that manages money for corporations, banks and pension plans. Based in New York City, Paulson & Co. has quickly become known for the prescience of its founder. In the early-to-mid 2000s, when consumers were buying houses thanks to low interest rates and the availability of subprime mortgages, John Paulson foresaw a shaky path in store for housing prices. As a result of betting on the subprime mortgage market to crash, his Credit Opportunities Fund flourished in 2007, increasing 589.9 percent in value. Another Paulson fund reportedly rose 353 percent during the year, and Alpha magazine estimated that Paulson made $3.7 billion in 2007.
Since then, Paulson has been following his instinct, and the tactic seems to be working. In 2010, John Paulson earned $4.9 billion, more than any other hedge funds manager in the U.S. As of the first quarter 2011, Paulson's net worth was estimated to be $16 billion.
The hedge fund king from Queens
Born in 1955 in Queens, N.Y., John Paulson has been interested in the business of turning a profit since he was a kid. According to a 2009 Portfolio profile of Paulson, as a child, the budding entrepreneur bought candy in bulk and sold it to classmates at a markup. After his sugar-selling days, Paulson graduated from New York University and received an MBA from Harvard Business School. At Harvard, Paulson attended a speech given Jerry Kohlberg (of private equity firm Kohlberg, Kravis, Roberts) and was stirred to implement his own ideas.
After stints at Boston Consulting Group and Bear Stearns, Paulson created his own hedge fund with $2 million of his own money. He bet on corporate mergers and bankruptcy-related corporate cases before betting against subprime mortgages—which came with consequences. Paulon’s winning housing bets were so impressive that he was forced to appear in front of a U.S. House committee in November 2008 to account for how he turned a profit while others were enduring financial ruin.