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Institutional Investors Alpha’s 13th annual ranking of the hedge fund industry’s best paid manager lists David Tepper at number one for the second straight year.
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David Tepper is once again the highest paid hedge fund manager in the world, this according to Institutional Investors Alpaha. The web site published its The Rich List: The Highest Paid Hedge Fund Managers of the Past Year yesterday. The list excludes family run funds, so certain famous investors who may have earned more did not make it. This was also the third time in the last five years that Tepper topped the list.
The founder of Appaloosa Management, David Tepper grew up in the Stanton heights neighborhood of Pittsburgh Pennsylvania. Tepper is a self made man who worked his way through the University of Pittsburgh where he earned a BA in economics. Forbes estimates the 56 year old’s net worth at $10 billion, which isn’t bad for someone whose first two investments both went bankrupt.
In 1993, Tepper formed Appaloosa Management with Jack Walton, specializing in distressed debt. The firm invests in public equity and fixed income markets around the world and was known as a junk bond investment boutique for its first ten years.
Appaloosa’s current clients include very wealthy investors, pension and profit sharing funds, foreign governments, foundations and universities. Its investors must make a three year commitment and withdraw no more than 25% of their total stake during that time.
Appaloosa Management operates four vehicles, including the offshore Palomino Fund LTD and its flagship fund Appaloosa Investment.
Even though last year was not a good one for most hedge funds, it was a banner year for Appaloosa. As a result, Tepper personally earned $3.5 billion, gaining a 42% return on his risky investments in troubled air lines American, Delta and Continental. Tepper also made money by investing in auto related stocks and asset backed securities.
The firm has seen its share of controversy, though. In September 2011, Appaloosa Management was found to have possibly received inside information on Washington Mutual’s debts by a Delaware bankruptcy court. It could have used this information to trade improperly on that debt.
David Tepper, however, has used much of his wealth for philanthropic activities. In March 2003 he donated $55 million to Carnegie Mellon’s business school where he received his MBA. It is now called the David A. Tepper School of Business. In November 2013, he gave the school another $67 million to develop its north campus quadrangle, now called the Tepper Quadrangle, which will include a new business school building.
The University of Pittsburgh, Tepper’s Alma mater, has also benefited from his largess. In addition, in 2006 he gave $1 million to an Israel Emergency Campaign run by the United Jewish Communities of Metro West New Jersey.
The Rich List showed that the 25 best paid hedge fund managers earned $21 billion between them, roughly 50 percent more than they earned in each of the previous two years.
Bill Ackman, who runs Pershing Square Capital Management and Barry Rosenstein, who runs Jana Partners, are also on the list.
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