John Paulson Big Haul
Hedge fund investor John Paulson made $5 billion last year. That's enough money to pay the pensions of three retired members of Congress!
That would have been impossible.
In order to do that, Paulson's funds would have had to have made $25 billion last year, and kept the entire 20% the fund earned in profits to himself, paying none of his portfolio managers.
Paulson manages just over ~$30 billion, and he didn't double the size of his fund. But he did earn $5 billion.
So how'd he do it?
Investing in his own fund -- he put his own money in and it churned out $4 billion, according to the WSJ.
So $4 billion of it wasn't really compensation, it was capital gains income. Which is even better! But still an important distinction. He made $5 billion two different ways.
The remaining about $1 billion in profits came from compensation. The largest hedge fund in Mr. Paulson's $36 billion investment portfolio, Advantage Plus, grew 17% last year, while another big one rose 11%, according to the WSJ. Paulson's gold denominated fund was up about 37% in 2010, according to an investor. (It was up 33.6% in December.)
His fund gained on shorts on Euro banks, profits from an investment Citi, and of course a lot came from gold.
So John Paulson earned about $1 billion from the 2 and 20% fees hedge funds managers take out of the fund, and $4 billion from investing in his own fund. $1 billion in compensation. $4 billion in personal investment gains.