John Paulson made more money in 2010 betting on gold than he did shorting the sub-prime mortgage crisis, which is ostensibly the career bet for which he’s best known.
But Paulson’s $3.7 billion year in 2007 got us thinking about other investors and the trades or bets that made their career.
So we rounded up some of the biggest hedge fund managers and traders and found out how many years into their career they made their “career” trades.
Surprisingly, most didn’t make their famous trades when they were young hot shots.
Of course there are a few stand-out youngsters, but most of the men were in the middle of their careers when they made their greatest trades.
Young guys seem to end up in another category.
Trade: In 1992, Soros sold short over $10 billion GBP as the Bank of England resisted an interest rate hike or a currency float. When the central bank withdrew the pound from the EERM, he pocketed an estimated $1.1 billion and was dubbed 'the man who broke the Bank of England.'
Firm: Quantam Fund
Trade: Made billions staging buyouts in the 1980s and taking control of positions in those companies.
Firm: Icahn & Co.
Trade: Shorted the entire market ahead of the 1929 crash and earned $100 million doing it.
Trade: Lynch ran Fidelity's Magellan Fund from 1977 and took it from $18 M AUM to $14 B by his retirement in 1990, beginning with a position in a $5 Fannie Mae stock. By '89, 5% of Magellan's assets were invested in Fannie Mae. The stock rose from $16 to $42... and kept rising.
Firm: Magellan Fund at Fidelity
Trade: He jumped on the real estate bubble early and began betting against the mortgage index in 2006. By shorting subprime he earned $3.5 billion in 2007. His 'Credit Opportunities fund soared 590% net of fees' in '07.
Firm: Paulson & Co.
Trade: In 2003, Hall bought long-dated oil-futures that would pay off if crude topped $100 in the next five years. In 2008, it did, and Hall made his Phibro division at Citi a nice big pile of cash (allegedly a huge chunk of Citi's $667 million in 2008 commodities revenue is because of Hall's result, represented 10% of the bank's total net income for that year, and earned Hall $250 Mill)
Trade: In the summer of 2001, as Enron's stock began to slide, Jim Chanos shorted the company in a massive way and made millions.
Trade: During the first year of his hedge fund's launch, Bacon apparently earned an 86% return on his investments by betting that the Gulf War would cause oil prices to spike.
Firm: Moore Capital Management
Trade: He foresaw the stock market crash and Black Monday in 1987, and with large short positions, tripled his wealth, with a 201% gain.
Firm: Tudor Investment Corporation
Trade: In October '87, a day after stocks plummeted more than 22%, he bet $50 million on stocks he thought were priced too low; his positions helped his firm recover huge losses (this is not surprising considering on his first day at Gruntal in 1978, he made an $8,000 profit for his desk).
Firm: Gruntal & Co.
Source: WSJ, via EliteTrader
Trade: When Long-Term Capital Management collapsed in '98, Cohen made bullish bets between August until mid-October and had returns of 49.2% while all the other hedge funds were averaging 2.6%.
Firm: SAC Capital Partners
Trade: Ok, so Sir John Templeton had a few good days as a young man (like when he bought $100 worth of every NYSE-listed stock that was trading under $1 in 1939, or when was one of first to invest in Japan in the mid-60s) but his coolest career trade was shorting a ton of Internet stocks at the ripe age of 88 and selling them ahead of the six-month lock-up expiry after their IPO.
Firm: Templeton Growth