John Alfred Paulson Case Summary

Introduction

John Alfred Paulson, a man who made one of the biggest fortunes in Wall Street history, is an American hedge fund manager who leads Paulson & Co., an investment management firm founded in 1994. John embarked on his career at Boston Consulting Group as a research analyst, providing business advice to multinational companies. The strong ambition to finance and investment, however, propelled him to seek a job on Wall Street. In 1994, John established his own hedge fund with $2 million, specializing in the event-driven investment. The basic strategy is “waiting until one company announces that it is buying another, rushing to purchase the target company’s shares, shorting the acquirer’s share (unless it is a cash deal), and then earn the differential between the two share prices when the merger closes"

In 2006, when everyone in the market was supreme confident on the housing price,

The firm had assets under management (as of June 1, 2007) of $12.5 billion (95% from institutions), which had jumped to $36 billion by November 2008. In 2007 alone the firm earned $15 billion. John Alfred Paulson (born December 14, 1955) is the founder and president of Paulson & Co. John A. Paulson, a prominent hedge fund manager who earned an estimated $3.7 billion in 2007 by correctly wagering that the housing bubble would burst.

Paulson & Co has capitalized on the problems in the foreclosure of credit derivative markets. In September 2008, Paulson bet against four of the five biggest British banks. His positions included a £350m bet against shares in Barclays; £292m against Royal Bank of Scotland; and £260m against Lloyds TSB5. His firm eventually booked a profit of as much as £280m after reducing its short position in RBS in January 20096. In December 2009, the New York Times reported that Paulson had profited during the financial crisis of 2007 by betting against synthetic collateralized debt obligations