Business

Hedge fund titan to pocket $3B for 2013

It could be one heckuva New Year’s Eve party for hedge fund titan David Tepper — again.

The founder of Appaloosa Management, with more than $20 billion under management, is looking at a possible $3 billion-plus payday in 2013, which could make him the highest paid hedgie.

That’s quite a feat, especially after Tepper’s 30 percent gain last year earned him $2.2 billion and the top spot on Institutional Investor Alpha’s annual “Rich List” of the top 25 hedge fund managers.

Tepper’s Palomino fund was up 38 percent, after fees, as of Nov. 30, according to an investor, making the 56-year-old one of the few in his business to post a return higher than the 29.1 percent gain of the S&P 500.

Also in the running for highest-paid hedgie is John Paulson, whose $20 billion firm is experiencing a comeback after years of double-digit losses. One of Paulson’s funds has gained 55 percent, but others are still below their high-water mark.

Tepper puts his success down to equal parts good strategy and good karma.

As for strategy in the brave new post-2008 world, he has transformed himself from being one of the savviest distressed debt investors into a top macro investor — or betting on worldwide trends.

For karma, he points to the tens of millions he gave to New Jersey food banks and shelters during the 2008 financial crisis in order to keep them going and the similar efforts made during Hurricane Sandy last year.

His investing perspective was unpopular in the hedge fund world over the past few years, as he refused to buy into the inflation hysteria that led so many managers to attack the Federal Reserve for its quantitative easing. Tepper thought depression was government’s greater concern — and still does. As a result, he didn’t get into the gold mania that cost peers like Paulson dearly.

He also foresaw the bull market that Fed easing would create and started buying bank stocks in late 2008, when other managers thought they could end up being nationalized.

“We always believed in this country,” Tepper told The Post. “We said it in 2008 and 2009 and again and again. We are on the verge of great things.”

That belief is mirrored in his investments in US airline stocks, like Delta Air Lines and United Continental Holdings, which are up 128 percent and 57 percent, respectively, year to date. Airlines accounted for more than $600 million of his portfolio as of Sept. 30.

Appaloosa has an annualized return of 27 percent since Tepper launched it in 1993, shortly after leaving Goldman Sachs.

What’s more, his returns have gotten better as the fund has grown larger, a contrast to the norm. He regularly returns money to investors to keep from getting too big. This year he expects to give back a little less than $2 billion.

As a result, Tepper owns a good chunk of the fund, a percentage he doesn’t disclose.