This article focuses on the important investment lessons from Paulson & Co. 3Q investor letter. Paulson & Co. is a New York based hedge fund managed by John Paulson. With over $29 billion under management, Paulson & Co. is one of the largest global hedge funds.

Paulson notably earned a record $3.7 billion pay day in 2007 from extremely profitable bearish trades executed during the financial crisis. Paulson’s latest funds include a Gold fund and a Financial Recovery fund. Paulson & Co.’s latest third quarter investor letter provides a unique insight into the hedge fund’s underlying investment philosophy.

Merger arbitrage, also known as risk arbitrage, is an event driven trading strategy that attempts to exploit the market price spreads of equities during mergers.