The origins of Passport Capital

Hedge Fund managers are the rock stars of finance. Often famous and nearly always rich, they have fans and followers to rival any musical outfit. Yet it's worth remembering how they gained fame. John Paulson was an unknown until he made a billion dollars from the GFC; Seth Klarmen's following has grown from decades of stunning performance while David Einhorn's celebrity is owed to a series of bold – and accurate – calls.

Perhaps the most interesting of all origin stories is the rise of US based manager John Burbank, who runs Passport Capital. At just 30, Burbank broke all the rules of sensible investing. He borrowed $50,000 from his credit cards and started trading. His previous experience in jobs such as selling hot dogs and painting houses may not have helped much but a degree from Stanford offered enough credibility to establish a real hedge fund in 2000 with just US$800,000. Today that sum stands at over US$3bn. How did he do it?

Burbank freely admits that many of his decisions were irrational at the time. Accessing capital from credit cards, running a fund at a substantial loss in the early years; these were the actions of cocky youth. But big bets have always been his hallmark. Passport was one of the earliest investors in Riversdale Mining, at one stage owning 19% of the company. When Riversdale went on to be taken over for almost $4bn, Passport made a fortune. Burbank is also renowned for success during the GFC. In 2007, while the rest of the market fell, Passport's flagship fund produced a 219% return. Today he is hugely bullish on Saudi Arabia.

None of this is to say that Burbanks method could or should be emulated. For every cocky success like Passport there are surely thousands that have failed. It's a heck of a story, though.