17 Hedge funds and private equity Hedge funds and private equity have come in for more than their fair share of sensational headlines. However, the bulk of all their business consists of perfectly acceptable financial transactions. The problem is that they appear to be making more money for people who are wealthy already, and it is difficult for most of us to see the benefits they bring to the general public. The hedge fund manager, John Paulson, made over $4 billion for his fund by betting that mortgage lending in the US had reached unsustainable levels, and the value of securities linked to mortgages would have to fall. His predictions were right; mortgage lending was spiralling out of control and reaching bubble proportions, and millions of people suffered as the housing market contracted. The bubble had to burst, and we