Five billion dollar Paulson

Hedge fund manager John Paulson netted $5bn for himself last year. Not too shabby.

by Emma Haslett
Last Updated: 31 Jan 2011

If you thought bankers’ bonuses were a bit over the top, brace yourself for this one: US hedge fund manager John Paulson managed to net himself a whopping $5bn (£3.15bn) last year – one of the biggest annual profits any investor has ever made. Analysts have taken it as a sign that the hedge fund industry is getting back on track – but it certainly puts some perspective on that City bonus debate…

It’s not just Paulson who could soon find himself the proud owner of a fleet of yachts. Other hedge fund managers have made themselves a nice little nest egg, too: David Tepper, the founder of Appaloosa Management, and Ray Dalio, the head of Bridgewater Associates, both made between $2bn and $3bn. But Paulson has retained his title as the richest man in one of the world’s richest industries. And it isn’t the first time he’s wowed the markets, either: back in 2007, a bet against the sub-prime mortgage market left bankers a more little red-faced when it paid off to the tune of almost $4bn (while they were left with, well, a global crisis).

Analysts have jumped at the chance to point out that this means the hedge fund industry is back to its old tricks, but it’s not as clear as that. On one hand, figures from Hedge Fund Research show assets managed by hedge funds have risen by 20% since 2008, to $1.92tn (which is almost a record). On the other hand, though, the average fund gained 10.49% last year, which is well below the S&P 500 stock index’s average of 15%. So it’s a tough call.

Compare this to our much-loved bankers. According to research by the Centre for Economics and Business Research, City employers were planning to pay out a total of £7.3bn to workers this year - relative peanuts, when you consider that it has to stretch among thousands of City workers. Almost makes you feel sorry for them, doesn't it?

OK, maybe not.

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