$2.5bn pay packet for fund manager

Huge return for investor who bought bank shares when everyone else was selling

Making billions of dollars is "not that hard", David Tepper tells people. Away from the pride and bluster of Wall Street, in a modest office in suburban New Jersey, Mr Tepper is closing out one of the most profitable years any hedge fund has ever had. His fund is up $7bn (£4.4bn), and he'll be taking a reported $2.5bn of that home personally.

The strategy: keeping your head when all about you are losing theirs.

The 52-year-old has managed to become one of the most successful investors in the world without becoming a household name, without attracting public opprobrium and without even having to skip dinner with his family.

In contrast to George Soros, known as the man who "broke the Bank of England" when he bet against the pound in 1992, or more recently John Paulson, whose bets against the US housing market turned him into a multi-billionaire when the crash came, Mr Tepper is an optimist, a buyer rather than a seller, a speculator who looks like he is building things up instead of tearing them down.

He buys things at the bottom, when no one else will. In the credit markets, they call these people distressed debt investors, folks who will buy the bonds of companies that everyone else thinks are going to disappear.

This year, he invested in Citigroup and Bank of America when many other people thought the two biggest US banks might be nationalised in the spring panic, and he has bought into Royal Bank of Scotland, too, as the British Government worked to repair that fallen titan. He's been doing his bit for what he calls "Mother England".

When the league tables of 2009 are finally compiled, it seems likely that Mr Tepper's Appaloosa Management will be at the top, a remarkable achievement for a man from a modest area of Pittsburgh.

He who eschews the glitz of Manhattan or the gargantuan houses of Connecticut in favour of nights at home in New Jersey with his wife Marlene and their three children, and for coaching his kids' baseball, soccer and softball. (His preference is soccer, because of the strategic thinking required.) The family still lives in the two-storey home that he purchased in the early Nineties.

"Money should be a secondary goal," Tepper told the business school magazine at Carnegie Mellon university in 2004, after he had donated $55m to his alma mater, which is now named after him. MBAs can be impatient when it comes to job hunting. Students facing graduation should work hard at finding an experience that will lead them to things that they like. I loved the markets, and that was my focus."

His love of numbers can be traced back to following baseball as a child, and memorising the myriad statistics from individual and team performances. His accountant father funded his first portfolio of stocks as a teenager.

A first job as a credit analyst in Pittsburgh eventually took him to Goldman Sachs in the 1980s heyday of junk bond trading, but when he was repeatedly passed over for partnership at the elite investment bank there he walked out to set up on his own.

Appaloosa's place at the top of the league table this year is no fluke. Twice before Tepper has made 100 per cent-plus returns: when he foresaw confidence returning to emerging markets in the middle of 1990s and again in 2003, when the effects of the last US recession abated. In the 17 years since he set up on his own, he has returned an average of more than 30 per cent a year.

And of course this is all happily self-reinforcing. With increasing billions to play with, each successful bet can earn bigger and bigger payouts. Unlike many hedge fund managers, Tepper rarely these days uses borrowed money to increase the size of his bets.

Nonetheless, his style of investing requires some mettle, perhaps why he keeps a sculpture of a pair of testicles in his office, to rub for luck and for laughs when clients come calling. In 2009, his ballsy bets paid off.

"I felt like I was alone," he told The Wall Street Journal yesterday, but he also was certain that everyone else was "nuts, nuts, nuts". He said: "Why would the government break its word? They're not going to let these banks go under, people aren't being logical!"

Start your day with The Independent, sign up for daily news emails
general electionThis quiz matches undecided voters with the best party for them
Arts and Entertainment
Keira Knightley and Matthew Macfadyen starred in the big screen adaptation of Austen's novel in 2005
tvStar says studios are forcing actors to get buff for period roles
Prince William and his wife Catherine, Duchess of Cambridge show their newly-born daughter, their second child, to the media outside the Lindo Wing at St Mary's Hospital in central London, on 2 May 2015.
Have you tried new the Independent Digital Edition apps?
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Ashdown Group: Trainee Consultant - Surrey/ South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Ashdown Group: Trainee Consultant - Surrey / South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Ashdown Group: Recruitment Consultant / Account Manager - Surrey / SW London

£40000 per annum + realistic targets: Ashdown Group: A thriving recruitment co...

Ashdown Group: Part-time Payroll Officer - Yorkshire - Professional Services

£25000 per annum: Ashdown Group: A successful professional services firm is lo...

Day In a Page

Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living
Increasing numbers of homeless people in America keep their mobile phones on the streets

Homeless people keep mobile phones

A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before