Can you imagine yourself as a fund manager making $3.7 billion a year? That’s a lot of money and I couldn’t imagine the area needed to put the stacks of notes just for the pleasure of looking at it. But that’s exactly the money one of the fund managers in the Wall Street made in 2007, a whopping US3.7 billion for himself. John Paulson, the founder of Paulson & Company, even beat George Soros as the ultimate winner. His firm ended 2007 with $28 billion in assets, up from $6 billion at the start *Wow!*.

As comparison George Soros, the currency speculator whom Malaysia former prime minister despised and accused of wiping billions of dollars of wealth during 1997-1998 Asia Crisis, earned only $2.9 billion from his personal stake through his Soros Fund Management. Soros’ $17 billion flagship Quantum Endowment fund racked up a 31.7 percent return in 2007, its best annual showing since the high-tech implosion at the start of this decade.

Another hedge fund manager, James H. Simons, 70, was at third place accumulated $2.8 billion via Renaissance Technologies. He is an award-winning mathematician trades anything anytime and everything everywhere.

According to Alpha Magazine, Paulson, 52, was shorting risky pools of collateralized debt obligations and buying credit default swaps on the cheap for the firm’s merger arbitrage and event-driven funds as early as 2005. Paulson was betting that the U.S.’s five-year housing bubble was ready to burst. Now, can you see the power of short-selling?

The top 50 hedge fund managers last year earned $29 billion, compiled by Institutional Investor. What can you learn from the top fund managers? These are what I learnt but you’re free to add onto it:

1. It again proves that the higher the risk, the higher the gain you’ll reap. Risk management is one of your best weapons against annihilation.
2. It’s easier and faster to make money, lots of it, from shorting financial instruments be it stocks, options, futures, commodities etc due to human’s emotion. People tend to fear and panic easily the moment they see some bloods on the floor. Do you know how much Soros made during the 1997-1998 Asia Currency Crisis?
3. In the financial markets nothing is certain. Every investors, speculators, fund managers, analysts are actually betting – it’s a 50/50 chance of hitting the jackpot. You can argue that it’s the biggest casino in the world but the difference is – there’re more market makers who leveled the playing fields than only one-market-maker from a typical casino.

Other Articles That May Interest You …

• Celebrating 10th Anniversary of Stock Market Crashes
• Speculators & Fund Managers Art of Making Money
• Will Currency Speculators Attack Malaysia Next?
• Aging Mahathir To Meet Soros Since 1997 Crisis

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April 16th, 2008 by financetwitter

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