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fund. The minimum investment for each is $5 million with a 1 percent management and 20 percent incentive fee charged.

ORGANIZATION

Appaloosa consists of 25 people, seven of whom are partners. Tepper, the sole stockholder, owns 100 percent of the voting rights. He is the decision maker when positions require size. He is very involved in the portfolio and focuses on different areas ranging from bankruptcies to emerging markets to equities. The general partner and its principals own more than 10 percent of the partnership's total assets.

There are six industry analysts who do credit analysis. There is also an in-house lawyer for the bankruptcy work.

A relatively loose organization exists. There are no investment committee meetings, and discussion is casual as everyone sits in a bull pen close together. Once a month, he and partner Jim Bolin, along with Ron Goldstein, the chief financial officer, review the portfolios over lunch at a nearby Mexican restaurant.

Appaloosa does not allocate to other managers. Allocations to private equity occur just in special situations.

Appaloosa had been indirectly linked to Michael Smirlock. In 1994, Tepper hired Smirlock to trade mortgage securities and raise a new fund—Mustang Investments. Smirlock was a principal. By 1997, Smirlock ran three hedge funds—Mustang, Shetland, and Trakehner. In August 1997, Smirlock created Laser Advisers, a new registered investment adviser, to manage the hedge fund and real estate investment trust. At this point, Laser was not an Appaloosa entity. Smirlock, as chairman, owned 80 percent of the entity of Laser Advisers, and Tepper owned the rest.1 After Smirlock mispriced securities, he eventually resigned as chief executive officer of Laser Advisers, the management company advising the hedge fund and the REIT, and was ousted as chief executive officer of Laser Mortgage.

BACKGROUND

Tepper says he initially became interested in investing as an 11-year-old watching his father trade stocks. In college, he developed an options scheme where he'd buy at 1/16 and sell at 1/8.