This is part of a series of articles sponsored by NIC Bank. NIC is currently having a rights issue that will close on September 14^th. 

Ranked 61^st in the 2012 Forbes World’s Wealthiest People, American hedge fund manager John Alfred Paulson quickly rose to billionaire status in 2007 by predicting that the then vibrant real-estate market would fall at a time when most Americans thought otherwise.

In 2010, he personally earned $5 billion (420 billion shillings) in what has been estimated as the single largest single payday in the history of Wall Street.

Early Years

Paulson was born in 1955 in Queens, New York. He was the third of four children. He attended a series of local public, schools, where he entered a program for gifted students. By his eighth grade, John was studying calculus, Shakespeare and other high school level subjects.

In 1973, John entered New York University to study creative writing, film and philosophy but soon lost interest in his studies. He went to Ecuador in South America where he regained his interest in making money when he observed how well his wealthy uncle lived.

After a stint exporting children’s clothing from Ecuador to the US and also selling wood flooring parquet flooring, Paulson returned to New York University in 1976 to complete his studies. While there, he developed a reputation from his classmates for his unique ability to break down complex ideas into simple terms.

He got straight A’s and earned a bachelors degree in finance thereafter enrolling at Harvard Business School on scholarship to earn an MBA in 1980 at the top 5 percent of his class.

He first worked at the Boston Consulting Group as a financial researcher before moving around Wall Street firms and then starting his own hedge fund, Paulson & Co. in 1994 using 2 million dollars and one employee.

Billionaire Status

John Paulson went from being an unknown trader to gain fame in 2007 by short-selling subprime mortgages just before the collapse of the United States real estate boom. Short selling is a trading strategy where a trader makes money if a stock or security moves down in price.

Predicting that the price of subprime mortgage backed securities – high default risk mortgages packed together and sold to investors – would fall, Paulson got together some investors in 2007and started a special hedge fund dedicated to betting against the housing market securities which fell as predicted starting that year. At the time there was a vibrant market for mortgage backed securities, which collapsed leading to the Global Financial Crisis starting 2007.

He made more than $15 billion (1.26 trillion shillings – about 2 billion shillings less than Kenya’s net public debt) for his hedge fund in 2007 with a personal take of $3.7 billion (294 billion shillings) that year. In 2008, he began betting against the institutions that had supported the collapsing American housing market, making another $2 billion (168 billion shillings) that year.

In 2010 he again applied his investment foresight into the Gold Market, earning the record $5 billion (420 billion shillings) pay that year.

He easily makes this year’s Forbes Billionaires list with a personal net worth of $12.5 billion; that’s 1.05 trillion shillings and just 0.4 trillion shy of Kenya’s 2012 budget of 1.45 trillion shillings.