John Alfred Paulson is an American hedge fund manager and billionaire who heads Paulson & Co, a New York-based firm he founded 20 years ago.   He manages nearly $25 billion in assets for global clients.

In 2007 Paulson made his name and a large part of his personal fortune (now estimated at $13.5 billion) betting big against the U.S. subprime mortgage lending market.  That strategy earned him nearly $4 billion personally.

In his second TV interview ever, Mr. Paulson talked about his fund's strategy with regard to merger arbitrage.  It was part of the 2014 Delivering Alpha Conference which is held each year in New York and includes many of the industry's top investors.

"This is a very exciting time to be in merger arbitrage.  Last quarter (Q1/2014), we had $1.1 trillion in announced transactions and that's the highest its been in the last five years and near the records achieved in 2007," Paulson says in the interview with CNBC's Melissa Lee.

He attributes the surge in M&A activity to:

  1. Very low levels of interest rates
  2. Record stock market valuations
  3. The ability to do accretive transactions because you can grow faster by acquisition than organic growth and shareholders are rewarding it

Paulson has been an active energy investor, and he spoke in depth about his strategy in the US shale sector.

"What's going on in the oil sector in the US is just amazing. The US is leading in oil extraction technology, and no other country in the world comes anywhere close to it."

As part of his merger arbitrage mandate, he bought positions in both Whiting Petroleum and Kodiak Oil  and then made over $360 million (on paper) when Whiting announced the acquisition of Kodiak for $3.8 billion in July of this year, creating the largest producer in the North Dakota Bakken.

He was also an investor in Caracal Energy which was ultimately acquired by Glencore for $1.35 billion.

Although Paulson made his name and fortune betting against the US housing market in 2007, he claims the best single investment any individual can make today is buying a primary residence for themselves.

"Today financing costs are extraordinarily low. You get can a 30-year mortgage for somewhere around 4.5% and if you put down 10% and the house is up 5%, which is the latest data, then you would be up 50% on your investment."

Unfortunately, Paulson neglected to discuss his gold portfolio at the Alpha Conference . . . probably a bit of a sore subject given the recent pullback in the gold price.