John Paulson

John Paulson Biography

John Alfred Paulson (born December 14, 1955) is an American hedge fund manager, investor, and philanthropist. He is the founder and president of Paulson & Co., a New York-based hedge fund.

Paulson became a billionaire by short-selling subprime mortgages in 2007 and made $3.7 billion that year. In 2010, he beat a hedge-fund record by making nearly $5 billion. His fortune was made largely from the collapse of mortgage backed securities market.

In 2011, he made losing trades in Bank of America, Citigroup and the fraud-suspected China-based Canadian-listed company, Sino-Forest Corporation. His flagship fund, Paulson Advantage Fund, was down over 40% as of September 2011. During that same time, Paulson had invested most of his personal fortune in gold, and it had grown by $3.1 billion from September 2010 to September 2011.

Early life and education

Paulson was born in 1955 in Queens, New York, the son of Alfred G. Paulson (November 22, 1924 - July 24, 2002) and Jacqueline Paulson (née Boklan born 1926).

His father was born Alfredo Guillermo Paulsen in Ecuador to Alfredo Paulsen Moulis, who served as governor of Guayas Province, and Zoila María Andrade. Alfredo's father was of half French and half Norwegian descent while his mother was Ecuadorian. Alfredo was orphaned at fifteen and moved to Los Angeles with his younger brother Alberto at age sixteen. He did odd jobs for several years and then enlisted in the Army where he served and was wounded in Italy during World War II. He later changed his surname from Paulsen to Paulson.

His mother was the daughter of Jewish immigrants from Lithuania and Romania who had moved to New York City. Jacqueline met Alfred while they both attended UCLA. They wed and moved to New York City where Alfred worked at Arthur Andersen and later as the CFO at public relations firm Ruder Finn. John was the third of four children born to the couple (Theodora, William, John and Julia).

John grew up in the Le Havre apartment complex in Queens, a thirty-two-building, 1,021-apartment, twenty-seven-acre development featuring two pools, a clubhouse, a gym, and three tennis courts. His family later moved to a modest home in Beechhurst, Queens. He attended a series of local public schools, where he entered a program for gifted students. Although his father was not ethnically Jewish and an atheist, he attended synagogue with his family at the Whitestone Hebrew Centre in Whitestone, New York. Paulson did not find out that his father was not Jewish until he was twelve. Despite his upbringing, Paulson listed in his yearbook at Bayside High the "Jesus club" and the "divine light club" among his interests during his senior year.

In 1973, Paulson entered New York University (NYU). As a freshman, he studied creative writing, worked in film production, and took philosophy courses. He soon lost his interest in his studies and his grades suffered. His father, sensing that he needed a change, proposed that his son take a summer trip. He bought him an airplane ticket to South America and that summer John traveled throughout Panama and Colombia before finally making his way to Ecuador where he stayed with a wealthy uncle. In Ecuador, Paulson states the experience living with his uncle: "brought me back to liking money again". Tiring of his privileged but uneventful life in Guayaquil, he traveled to Quito where he soon ran out of money. It was there he started his first business venture after meeting a man who manufactured cheap children's clothing. Paulson commissioned some samples which he sent to father back in New York. His father successfully marketed the clothing to several department stores and the venture became quite successful. Later, Paulson and his father, using the same arrangement, branched into wood parquet flooring selling $250,000 in flooring. His father gave him the entire $25,000 commission.

In 1976, Paulson returned to NYU after realizing that sales did not provide the steady and secure cash flows he desired. At NYU, he developed a reputation among his classmates for having a unique ability to boil down complex ideas into simple terms. In 1978, he received his bachelor's degree in finance summa cum laude from New York University's College of Business and Public Administration (now the New York University Stern School of Business), where he was valedictorian of his class. Paulson subsequently attended Harvard Business School, where he received the Sidney J. Weinberg/Goldman Sachs scholarship. In 1980, Paulson graduated from HBS as a George F. Baker Scholar (top 5 percent of his class) earning an MBA.

Career

Paulson began his career at Boston Consulting Group in 1980. The work Paulson did at Boston Consulting Group was research intensive, and he excelled at it. But Paulson was not investing, just giving advice to companies, and he wanted to move to Wall Street without starting all over again from the bottom of the ladder. He then left to join Odyssey Partners where he worked with Leon Levy. Later he took a position in the mergers and acquisitions department at Bear Stearns followed by partner status at the mergers arbitrage firm Gruss Partners LP. In 1994, he founded his own hedge fund, Paulson & Co. with $2 million and one employee.

In 2008, Paulson co-wrote a Wall Street Journal op-ed piece suggesting an alternative to the Treasury Secretary's plan for stabilizing the markets. Later that year he began a new fund that lent money to investment banks and hedge funds during the mortgage crisis. Paulson "shot to fame and fortune" when his investment strategies paid off during the subprime housing market crash. His bet against the subprime mortgage bubble has been called the greatest trade ever, among others, by Gregory Zuckerman.

Philanthropy and political contributions

Between 2009 and 2011 Paulson made several charitable donations, including $15 million to the Center for Responsible Lending, $20 million to New York University Stern School of Business, $15 million to build a children's hospital in Guayaquil, Ecuador and £2.5 million to the London School of Economics for the John A Paulson Chair in European Political Economy. In October 2012, Paulson donated $100 million to the Central Park Conservancy, the nonprofit organization that maintains New York City's Central Park.

Paulson contributed $140,000 to political candidates and parties between 2000 and 2010, 45% of which went to Republicans, 16% to Democrats, and 36% to special interests. In 2008 while testifying before US US House Committee on Oversight and Government Reform Paulson was asked about the low tax rate on long-term capital gains and carried interest earnings and Paulson replied "I believe our tax situation is fair." In 2011, Paulson donated $1 million to Mitt Romney's Super PAC Restore Our Future. His name and picture were featured in an episode of the Colbert Report, in a segment mock-honoring the 22 largest Super PAC donors. In a 2012 interview with Bloomberg Businessweek magazine he expressed displeasure over the Occupy Wall Street movement and protestors who had picketed his townhouse in 2011.

Personal life

In 2000, he married Jenny Zaharia, in an Episcopalian Church in Southampton, New York. Jenny was a Romanian immigrant who came to the United States after her brother George, a track star in Romania, defected and moved to Queens. They have two daughters, Giselle and Danielle, and live on the Upper East Side of New York City. He owns several homes, including one in Aspen purchased for $24.5 million in 2010, an estate in Southampton he bought for $41 million in 2008, and a 28,500-square-foot Upper East Side townhouse on East 86th Street, obtained for $14.7 million in 2004. Paulson has an older sister named Theodora Bar-El née Paulson; PhD, a prominent Israeli biologist.