John Burbank is a founder of San Francisco based Hedge Fund - Passport Capital. Since 2000, he says he’s netted investors the 40% annualized gains. Investors in his flagship hedge fund, $2.5 billion (assets) Passport Global Strategy, ended 2007 up 219%, even after his 1.5% management fee and 20% cut of profits. Impressive!
“With housing all the rage in 2004, home lenders were throwing money at people with lousy credit. Confident the market would eventually crack and intent on cushioning his global portfolio when it did, Burbank began shorting the stocks of U.S. subprime lenders.
Housing continued to go up. So Burbank doubled down by purchasing credit default swaps that would pay bounties if securities backed by subprime mortgages went into default.
“There’s no way you can make 30% returns being long the S&P 500,” the scruffy 44-year-old says of his swing-for-the-fences investing style. “If you’re going to hit that kind of return, you have to go places where it can happen.”