Who is David Tepper
David Tepper is a legendary investor specializing in distressed debt and manages one of the most successful hedge fund companies of all time. The value of David Tepper is around $ 11 billion, according to Forbes 2020 The World’s List of billionaires.
BREAKDOWN David Tepper
David Tepper was born in Pittsburgh, Pennsylvania on September 11, 1957. He graduated from the University of Pittsburgh in 1978 with a degree in economics. He obtained his MBA in 1982 in what is now known as David A. Tepper School of Business at Carnegie Mellon University. The business school was originally known as the Graduate School of Industrial Administration (GSIA). The school changed its name in recognition of the investing tycoon after his generous donation of $ 55 million in 2003.
David Tepper began his career as a credit and securities analyst at Equibank. He then worked for Republic Steel as a financial analyst. It was at this point that Tepper gained first-hand experience in the credit structure of a troubled business when the steel industry had financial problems. His experience with money management came with his next job, at Keystone Mutual Funds, working on the high-yield desk. Tepper started his career at Goldman Sachs in 1985 as a credit analyst. He quickly progressed to the high-yield office as a main trader where he danced mainly with junk bonds. Tepper bought troubled bonds from banks shaken by the rotten bond market collapse in 1989. Some of these banks survived their bankruptcy, which enabled Goldman Sachs to make a lot of money with skills. from Tepper.
David Tepper’s Hedge Fund Firm
In 1993, David Tepper co-founded Appaloosa Management L.P. with former Goldman Sachs colleague Jack Walton. Appaloosa Management started with $ 57 million in capital. In the first six months, Appaloosa returned 57% on its assets and the fund grew to $ 300 million in 1994, $ 450 million in 1995 and $ 800 million in 1996. In 2020, its assets under management exceeded $ 20 billion. David Tepper returned 20% of its investor capital in 2020. In 2020, the assets under management of Appaloosa, as indicated by Forbes, were worth $ 17 million. according to Institutional investor, $ 1 million invested in Appaloosa at its inception date would be worth $ 181 million just over 20 years later.
Appaloosa invests mainly in the debt of distressed companies. His first investment was in a troubled steel company, Algoma Steel, which was in the process of going bankrupt. Tepper bought the steel preferred shares for $ 0.20 and sold them in one year for about $ 0.70.
His fund lost 25% in the 2002 unwanted bond crash, but quickly recovered in the following years after successful bets were made on troubled and bankrupt companies like Enron, Worldcom, Marconi Corp. and Williams Co. The bonds he bought from these companies contributed to a 150% gain in his portfolio position.
In early 2008, Tepper bet that blue chip stocks would go up. The market experienced a downward spiral soon after and Appaloosa lost 25%. After the 2008 subprime mortgage crash, Tepper was optimistic about banking stocks when most investors were scared and wary of these institutions. He bought preferred shares of Washington Mutual and Wachovia, both of which were bought by larger rivals who made a good profit for Tepper. While panicked sellers lowered the value of financial institutions like Bank of America and Citigroup, Tepper was investing in it. The hedge fund mogul also purchased approximately $ 2 billion face value of commercial mortgage-backed securities issued by AIG. When the government intervened in the survival of these banks, Appaloosa made more than $ 7 billion in profits, a net cost return of 120% and a net salary of $ 4 billion. Tepper’s trades after the 2008 stock market crash can arguably be called the best deals ever.
David Tepper has expanded his aggressive bets beyond the coasts of America. From the mid to late 1990s, when some emerging economies were on the verge of defaulting on sovereign debt and investors were fleeing the other way, Tepper took advantage of the negative situation by analyzing the countries that were safe to straighten up. He bought debt in Argentina (economic crisis in Argentina), South Korea (Asian financial crisis) and Russia (Russian financial crisis), which earned him returns of 42%, 30% and -30% , respectively. Although he recorded a loss in his initial bet that the Russian government will not default, which turned out to be wrong, he continued to buy government bonds and ultimately won 60% on his bet.
Tepper’s investment philosophy is to invest on the basis of facts and without emotion.
Over the years, Appaloosa has repeatedly returned capital to its investors. In order to focus, Tepper normally hands over a surplus of cash when it decides that the fund has reached an unmanageable size.
Philanthropy by David Tepper
In addition to the $ 55 million awarded to Carnegie Mellon University in 2003, Tepper also donated $ 67 million to the university in 2020. The University of Pittsburgh and Rutgers University have also benefited from its educational charitable donations. Other foundations he has generously donated include the Robin Hood Foundation, Teach for America and Better Education for Kids, a political action group he co-founded. Appaloosa pledged $ 20 million to various charities in 2020 to celebrate its 20e anniversary. He donated $ 3 million to fund hurricane relief efforts in 2020 after Hurricanes Maria, Irma and Harvey.