Hedge-Fund Manager Paolo Pellegrini Is a Jazz Lover With ‘Entry-level Supercars’

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Photo: Patrick McMullan

Paolo Marco Pellegrini foretold the housing bubble and helped execute the bet against subprime mortgages that made his former mentor, John Paulson, a billionaire. And he's actually kind of charming, in a Hannibal Lecter sort of way.

Here is what we learned about him from this weekend's Bloomberg profile:

• He is 52 years old.
• He is six foot two and weighs 190 pounds.
• He lives on the Upper West Side with his third wife, Henrietta, and her daughter.
• But he was born in Rome.
• Where his parents were scientists.
• And he played classical piano and studied Latin and ancient Greek.
• As a teenager, he joined Italy's Partito Radicale, a pacifist, liberal, pro-gay, pro-pot political party, and worked handing out flyers for them throughout college.
• In his spare time, he worked as a jazz D.J.
• He was fired by two investment banks because he wasn't a good salesman.
• In 2007, while working at John Paulson's hedge fund, he used federal data to identify the housing bubble. Then he helped pop it by engineering a massive bet against subprime mortgages, making the firm billions of dollars. “It was technically a beautiful trade,” one money manager tells Bloomberg. “The asymmetry was incredible.”
• This made John Paulson happy, which in turn made Paolo happy.

He recalls that Paulson broke into a smile when he showed him the proof that houses were overpriced. “John doesn’t smile,” Pellegrini says. “It felt great.”

• Also, he made tens of millions of dollars for himself on the trade, which allowed him to purchase "a couple of what he laughingly calls “entry-level supercars”: a silver Ferrari F430 with a base price of $168,000 and a black $109,000 Audi R8."
• He also started his own fund, PSQR LLC, to "protect his newfound riches," per Bloomberg.
• But Paolo is not just about things. Paolo has thoughts. "Paolo is a deep thinker,” says William Michaelcheck, founder and chairman of Mariner Investment Group, a New York hedge-fund firm where Pellegrini worked as an analyst in 2003 and 2004.
• And sometimes, he can be very blunt and sassy about them. For instance, when asked how the U.S. central bank has handled the crisis, Paolo says:

“The Fed is printing money, as instructed by the financial services industry, so that they can stick all of us with the bill."

And as for Federal Reserve chairman Ben S. Bernanke:

“I have zero confidence in what the Fed is doing.”

And as for you:

“People were pretending they were earning a living, and they were not,” he says. “Banks lent them the money so they could live beyond their means.”

He suspects things are going to get much worse, economically speaking. But then, he will probably make lots more money off of it. That, we imagine, is what's making him smile in the above picture. Or it could be the pot.

Pellegrini 80% Return Proves Paulson Protege No Fluke at Fund [Bloomberg]