Stock Market Forex Down Arrow

Bad bets on the U.S. subprime mortgage market, as shown countless times in the past few months, can be deadly—or at least markedly unpleasant—for hedge funds. Good bets? They can be unspeakably lucrative.

Small Cap managers that are up 10% this year are considered to be doing well. If that does not impress you, this will:

And no one, it seems, bets as well as John Paulson and his Paulson & Co.: The $4.5 billion Paulson Credit Opportunities Fund, set up last year for the express purpose of betting against subprime, is reportedly up a remarkable gross return of 690% and a net return, after fees, of 551% for the first 10 months of the year, according to a source close to the firm. The firm’s Credit Opportunities II fund has made a gross return of 410% and a net 328%.

Paulson’s assets under management have mushroomed from $6 billion in January to nearly $28 billion, and the firm is close to cracking the top 10 in hedge fund land, at least in AUM. It is hard to see their performance being much better. I am assuming they are number one, a remarkable feat for such a large fund.

He’s so confident that it’s going to get worse, he’s raising a new $5 billion fund.

Lets get the numbers straight: The company is a 9 person hedge fund and at the 2% assets under administration and 20% of returns valuation (and that’s conservative for a very well regarded HF manager like Paulson) that’s $3.82 billion they’re taking home in compensation this year alone.

Another prime example of a big shot hedge fund manager making exuberant amounts of dough points to Steve Cohen at SAC Capital Partners whom has a policy to keep 50% of gains plus a 3 percent management fee. Then again, he’s generated an average annual return of 43.5% since 1992 – which is astounding. Cohen’s personal compensation levels have been off the proverbial hook for years now. So much so that it’s actually funny to read:

2006 – $1.2 billion
2006 – $1.0 billion
2005 – $450 million
2004 – $428 million
2003 – $350 million

So, How do you stack up with the best and brightest?

Related Posts: