Career Lessons From a Top Fund Manager

David Tepper's climb to the top of the 2009 hedge fund performance ladder offers fresh evidence for that old saw, "Build your career around doing what you love."

Throughout his life, the Appaloosa Management founder has repeatedly drawn on personal and intellectual passions for direction and focus. The UK Indepdendent says in a profile:

His love of numbers can be traced back to following baseball as a child, and memorising the myriad statistics from individual and team performances. His accountant father funded his first portfolio of stocks as a teenager.

In an interview published in Carnegie Mellon University's business school magazine several years ago, Tepper advised candidates "to work hard at finding an experience that will lead them to things that they like. I loved the markets, and that was my focus."

His passions show up even in activities he pursues with his own kids. He coaches baseball, soccer and softball, but "his preference is soccer, because of the strategic thinking required," according to the Independent.

Overcoming a Setback

Two further lessons: Practice turning lemons into lemonade, and keep your head when others are losing theirs.

At Goldman Sachs in the 1980s, the junk bond desk where Tepper traded was one of the firm's most profitable units, BusinessWeek says. Yet partnership eluded him more than once. He made the most of the setback, setting out on his own in 1992 and returning an average of 30 percent-plus in the 17 years since.

For the first nine months of 2009, Tepper's flagship Appaloosa Investment LP I fund returned 117.3 percent. That made it the top performer among $1 billion-plus hedge funds tracked by Bloomberg. (In 2008, though, that fund suffered a loss of 26.7 percent.) Appaloosa Management's three other hedge funds posted stellar returns this past year too, ranging from 83.5 - 114.4 percent. Profits from the funds totaled approximately $6.5 billion through Sept. 30, and Tepper himself reportedly earned $2.5 billion.

It takes strong nerves to buy when everyone else is not just selling, but panicking. His profits came from buying deeply depressed shares and debt of big banks including Bank of America, Citigroup, Royal Bank of Scotland, Fifth Third Bancorp, SunTrust, Commerzbank and Lloyds Banking Group. He also bought bonds of AIG.

Although he's had big years before 2009, Tepper has long eschewed the lifestyle associated with hedge-fund tycoons. He owns no vacation homes, sent all his kids to public school, and has lived with his family in the same house since 1991.