Wednesday, November 14, 2007

Hedge Fund of the Year : Our friends at Paulson

Paulson’s Credit Opportunities Fund

U.S. hedge fund manager Paulson & Co. has turned an investment of almost $500 million at the start of the year into almost $3.6 billion by taking out a form of insurance that started paying out as soon as subprime mortgage securities lost value, investors said.

The fund has made a 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%.

The firm began betting on subprime in the middle of last year. Banks were offering credit default swaps, a kind of insurance contract, on the BBB-rated tranches of securities backed by U.S. subprime mortgages. The buyer had to pay a premium of 1% a year to the banks, which undertook to pay out the value of any falls in the BBB tranches.

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Lunch is for wimps

Lunch is for wimps
It's not a question of enough, pal. It's a zero sum game, somebody wins, somebody loses. Money itself isn't lost or made, it's simply transferred from one perception to another.