As the world crashed, the man with brass testicles on his desk made $2.8 billion

December 25, 2009

December 22, 2009

An American hedge fund manager is set to collect a $US2.5 billion ($A2.8 billion) pay package for the year after staking huge bets that global banks would recover in 2009.

In one of the richest pay deals of recent years, David Tepper, boss of New Jersey-based Appaloosa Management, stands to land over a third of the $7bn profits generated by the firm in 2009. The hedge fund has said it generated over 120pc returns for year to the beginning of December.

Mr Tepper, a former Goldman Sachs trader who reportedly keeps a brass pair of testicles on his desk, started buying shares in American investment banks in February when the markets feared that the companies would be nationalised. He bought Bank of America when the shares were trading below $3 and Citigroup at just $1. The firm, which specialises in spotting value in distressed companies, also bought large tranches of debt in February and March. He told the Wall Street Journal: “I felt like I was alone … no one was even bidding.”

As a result Mr Tepper, who was already listed among the 50 richest Americans worth $2bn, has more than doubled his net worth. His earnings for the year dwarf the pay of bankers and hedge fund managers which have sparked international controversy following the financial crisis.

The profits also far outstrip those made by Crispin Odey, the British hedge fund manager, who made similar bets that the banks would recover and earned 30 million pounds.

The star financier grew up in Pittsburgh, the son of an accountant. He recently bought a controlling stake in the Pittsburgh Steelers, the American football team and reportedly never misses a home game. He was educated at Carnegie Mellon University, which re-named its business school the Tepper School of Business after the trader gave it $55m in 2004.

Mr Tepper started as a junk bond trader at Goldman but left after being repeatedly passed over for partnership.

He set up Appaloosa, named after a breed of horse with distinctive colouring, in 1993 with some colleagues from Goldman.

At the end of 2008, Appaloosa had a track record of generating an average of 30 per cent returns a year. Its assets under management have tripled in just three years to $12bn.

Mr Tepper has built his reputation on judging value in panic situations.

He created a Russian debt fund in the wake of the 1997 debt crisis which generated vast profits two years later.

He also spotted the up-coming commodities boom early and bought steel, coal and natural resources companies in 2007 ahead of the 2008 surge.

But his bets have not always been correct and his fund is known as being volatile.

Last year his fund lost 25 per cent – far more than the industry average of 19 per cent. But unlike plenty of others, his investors continued to back him into 2009.

In 2006 he invested heavily in Delphi, the bankrupt American car parts supplier, but sparked a heated legal row when he and other investors pulled out of a deal to inject $2.6bn into the company. The investment cost his firm $200m.

Hedge funds around the world are also on track to post the best returns for a decade, according to research firms. After an appalling 2008, the survivors are rebuilding the industry’s tattered reputation, helped along by rising markets.

The Telegraph, London


3 Responses to “As the world crashed, the man with brass testicles on his desk made $2.8 billion”

  1. Hey, ok, I get it, I guess – but does this really work?

  2. Sometimes it’s really that simple, isn’t it? I feel a little stupid for not thinking of this myself/earlier, though.

  3. Hello – just a short note to say thanks for this article. Very informative.

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