John Paulson, the chief of Paulson & Co., was one of the few unalloyed stars of 2008, betting against housing-related CDS, when the rest of the world was still convinced that nothing bad could happen. Now he’s losing one of his top men Paolo Pellegrini, who’s expected to start a fund of his own:
WSJ: The man who helped John Paulson pull off one of the greatest trades of this decade is leaving his side.
Paolo Pellegrini, who played a crucial role in helping to implement bets against subprime mortgages that netted Paulson & Co. about $15 billion in 2007, resigned from the $36 billion hedge-fund firm Dec. 31.
While Mr. Paulson is the visionary within the firm who drives its general direction, Mr. Pellegrini and a few others helped find the riskiest subprime-mortgage securities to bet against, and figured out the best way to capitalise on their expected falls in value.
Mr. Pellegrini put together data showing that even stabilizing home prices would lead to huge losses in the subprime market, a possibility that other investors scoffed at when the trades were made in 2005 and 2006.
We’re pretty sure that even in this environment, Pellegrini will find it pretty easy to raise money. Not only is he hot, but Paulson has established itself as a pro-investor fund, scolding other hedge funds that limit redemptions (easy to say when you’re up huge and liquid, of course). No word on strategy, or whether Pellegrini will continue Paulson’s strategy of nibbling on the long side of assets they had previously bet against.
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