‘Don’t focus on what you can make, but on what you can lose’

David Craig, a pioneer of the British hedge-fund industry, recalls lessons learned from John Paulson, the New York investor who topped last year’s global earnings league

New York in the mid-1990s: my long-time investing partner Richard Atkinson and I were in the city seeking out people with whom we might co- invest. We had run our own fund — reputed to be the first hedge fund in London — for 11 years, and had progressed to a stage where we thought we were getting good at this sort of talent-spotting. Nonetheless, we were particularly wary of getting fleeced by second-rate opportunists, or worse, fraudsters. We could only avoid that by rigorously counselling with a network of in-the-know types who could help with our due diligence processes. Towards the end of day four we popped in to see Guard Hill, an up-and-coming arbitrage firm resident at the Bear Stearns Galleria on Park Avenue.