JOHN PAULSON
Paulson & Co., greatest trade ever, subprime mortgage short, $4B personal profit in 2007
He made $4 billion in a single year. Not the fund — him personally. That was 2007, and at the time it was the largest personal trading profit in history. He made it by betting the US housing market would collapse when almost everyone — including the banks selling him the trade — thought he was crazy. Then he gave a lot of it back. His subsequent bets on gold and pharmaceutical stocks cost his investors billions, and his fund shrank from $38 billion to under $10 billion. He converted to a family office in 2020. It''s harder to stay right than to be right once.
Net Worth
~$4B
Nationality
American
Time Horizon
Long-Term
Risk Appetite
8 / 10
CAREER & BACKGROUND
John Paulson grew up in Queens, New York. He studied finance at NYU and got his MBA from Harvard Business School in 1980, graduating as a Baker Scholar — top 5% of his class.
He worked in mergers and acquisitions at Bear Stearns and then at Gruss & Co., a merger arbitrage firm. He started Paulson & Co.
in 1994 with $2 million. The fund grew steadily through merger arbitrage and event-driven investing.
By 2006 it managed about $6 billion.
Then, in 2005, a young analyst named Paolo Pellegrini walked into his office with an analysis of the US housing market. The numbers showed that house prices had grown far beyond historical norms, supported by loans that couldn''t survive any meaningful increase in defaults.
Paulson spent months verifying the analysis. He then spent 2006 convincing banks to sell him credit default swaps on mortgage-backed securities.
The banks thought he was wrong. In 2007, the mortgages defaulted.
His fund made $15 billion. He personally made approximately $4 billion.
That''s roughly $11 million per day.
COMPANIES & ROLES
Paulson & Co. is the fund he started in 1994.
After the housing trade it peaked at $38 billion in assets under management — one of the largest hedge funds in the world. Then came the losses.
He made a large bet on gold starting around 2009, believing that central bank stimulus would cause inflation. The inflation didn''t arrive for years.
His gold fund lost over 60% of its value. He also took a large position in Valeant Pharmaceuticals as a platform acquirer in healthcare — a strategy that collapsed when Valeant''s pricing and accounting practices came under regulatory scrutiny in 2015–2016.
He lost roughly $4 billion across his funds on Valeant.
By 2019 assets were down to approximately $9 billion. He returned outside capital to investors in 2020 and converted Paulson & Co.
to a family office managing his own money.
INVESTING STYLE & PHILOSOPHY
Before the housing trade, Paulson was an event-driven investor — he looked for catalysts like mergers and acquisitions where a target company''s stock was trading below the likely acquisition price. It''s a consistent, lower-risk strategy.
The housing trade was different in scale but not in concept: he identified a massive mispricing, figured out the cheapest way to get exposure to it, and waited.
After 2008, his investing became less disciplined. Gold made sense as an inflation hedge in theory.
Valeant looked like a Berkshire-style roll-up at first. Both became expensive failures.
The same willingness to make large concentrated bets that built his fortune also drove the losses.
THE PLAYBOOK
Risk Approach
He''s a high-conviction, concentrated investor. The housing trade required enormous conviction held for two years while the position was technically losing money on paper.
He held and he was right. The problem is that the same trait — sustained conviction in a large concentrated position — produced very different results in gold and Valeant.
The housing trade had a clear, verifiable catalyst. The subsequent bets were more reliant on macro predictions that didn''t materialise on the expected timeline.
Money Habits
He lives in New York and has been one of the larger buyers of prime Manhattan and Hamptons real estate over the years. He donated $400 million to Harvard in 2015 — the largest donation in Harvard''s history at the time.
The school was renamed the Harvard John A. Paulson School of Engineering and Applied Sciences, and later renamed back after student controversy over the donor.
He has given significantly to healthcare research. His personal life became public during a contentious divorce from his first wife.
BIGGEST WIN
2007. The housing trade.
He bought credit default swaps on subprime mortgage-backed securities — insurance that paid out when the mortgages defaulted. Total fund profits: $15 billion.
His personal take: approximately $4 billion. At the time, it was the largest single-year gain in hedge fund history.
His investors were very happy. He was on the cover of every financial publication.
It''s still the benchmark everyone uses when talking about the best trades ever made.
BIGGEST MISTAKE
Gold. He launched a gold-denominated share class starting around 2009.
His thesis: central bank stimulus would create inflation and gold would rise. He was early and then wrong.
Gold peaked in 2011 and fell for years. His gold fund lost over 60%.
Then Valeant. He took a large position in Valeant Pharmaceuticals when it looked like a brilliant roll-up strategy.
When Valeant''s pricing practices came under scrutiny in 2015, the stock collapsed. He lost roughly $4 billion across his funds.
It''s a remarkable story: the man who made the greatest trade in history then proceeded to give back billions of it.
FINANCIAL PHILOSOPHY
He''s an event-driven value investor at heart. He looks for definable catalysts — a merger, a restructuring, a market dislocation — that will close the gap between price and value.
The housing trade was the largest version of that pattern he ever found. His mistake post-2008 was applying concentrated conviction to macro bets — gold and Valeant — where the catalysts were less defined and the timelines less certain than the event-driven situations he''d spent his career on.
FAMILY & PERSONAL LIFE
He was married to Jenny Zaharia; they divorced in 2018 after a contentious legal battle. He has two daughters.
He remarried in 2022 to Alina de Almeida, who is significantly younger than him. His personal life has been considerably more public than he would probably prefer.
EDUCATION
NYU Stern School of Business, BS summa cum laude, 1978. Harvard Business School, MBA, 1980, Baker Scholar — top 5% of his class.
He worked in M&A at Bear Stearns and at Gruss & Co. before starting his own fund.
BOOKS & RESOURCES
The Greatest Trade Ever by Gregory Zuckerman is the definitive book on Paulsons housing bet
Written with Paulson''s cooperation and covering the trade in more detail than anywhere else. It''s the best place to start
Covers the same trade from multiple angles, including Paulson''s, and is more readable if you want the broader story
For context on what Paulson was betting against: Liars Poker by Michael Lewis explains the mortgage bond market from the inside.
Too Big to Fail by Andrew Ross Sorkin covers the 2008 crisis from inside the banks that were on the other side of his trade.
The story of Long-Term Capital Management''s collapse — the best account of what happens when concentrated macro conviction meets an uncooperative timeline
As an Amazon Associate, Netfigo earns from qualifying purchases. Book links above may be affiliate links.
QUOTES (6)
We're not smarter than everyone else. We just worked harder on this one trade.
The best opportunities arise when the market gets a fact wrong.
I looked at the data and thought — this is going to end badly.
Risk management is not about avoiding risk. It's about understanding it.
The larger the divergence between price and value, the more compelling the opportunity.
We looked for situations where the downside was limited and the upside was substantial.
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Related Profiles
Investors
George Soros
Both ran multi-billion dollar funds built on large concentrated macro bets — Soros in currencies, Paulson in credit markets
Michael Burry
Both made billions from the same 2007–2008 housing collapse using credit default swaps — two of the few people on the right side of the biggest trade of the decade
Ray Dalio
Contrasting approaches to risk: Paulson concentrated into high-conviction bets, Dalio diversified across economic environments