David Tepper

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“The point is, markets adapt, people adapt.”David Tepper, 2010 Ira Sohn Investment Conference

David Tepper is the founder of Appaloosa Management, the investment firm he established in 1993 after working as a credit analyst at Republic Steel, Keystone Mutual Funds and Goldman Sachs. At Goldman, he became head trader of the high-yield desk and developed the experience in stressed capital structures that would define Appaloosa’s early advantage.

Tepper is best known for buying securities whose prices imply an outcome materially worse than the one he considers probable. His opportunity set has included distressed corporate and sovereign debt, bank loans, equities and other instruments across the capital structure. The work begins with balance-sheet survivability, asset value, legal priority and access to liquidity, but it also requires a judgment about how governments, creditors, management teams and markets will adapt under pressure.

His most celebrated investments came during periods of severe dislocation. Appaloosa bought distressed bonds after corporate failures in the 1990s and early 2000s, and purchased deeply depressed financial-company securities during the 2008–09 crisis after Tepper concluded that published government policy made a systemic collapse less likely. These trades illustrate his willingness to concentrate when the downside is bounded by a credible backstop and the market is pricing near-catastrophe.

Tepper’s edge is therefore not conventional low-volatility value investing. It combines fundamental credit analysis, macro and policy awareness, rapid reassessment and unusually high tolerance for mark-to-market volatility. He may own ordinary equities when they offer the best risk-reward, but the common thread is an asymmetric payoff rather than a permanent preference for any asset class or investment style.

Public accounts describe Appaloosa as one of the most successful hedge funds of its generation, but a complete, current, independently published return series is unavailable. The firm returned substantial outside capital as it evolved toward managing more of Tepper’s own wealth, which also makes recent performance and portfolio scale difficult to compare with its earlier partnership record.

Tepper’s record includes periods of sharp drawdown and positions that did not work as intended. A strategy built around distressed or highly cyclical securities can suffer when a presumed policy backstop, recovery value or timing judgment proves wrong. His success should therefore be understood as the result of risk selection and adaptation, not as evidence that distressed assets are inherently safe.

• Carnegie Mellon University — David Tepper Biography ↗
• Carnegie Mellon University — 2018 Commencement Speech ↗
• Bloomberg — Appaloosa’s Tepper on Buying Bank Stocks After the Financial Crisis ↗
• The David A. Tepper Foundation — Founder Profile ↗
• SEC EDGAR — Appaloosa LP Filings ↗