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Highest paid hedge-fund managers

Paulson & Co.’s John Paulson earned $2.7 billion in incentive fees in the first nine months of 2007, putting him at the top of our list of best-paid hedge fund managers. His smartest move: betting the mortgage bubble would pop. 

The subprime crisis that’s caused so much trauma for hedge funds and investment banks has brought only good news for John Paulson. He’s the manager of more than $7 billion in hedge fund money keyed to mortgage credit. Paulson started warning his investors back in the middle of 2006 that the frenzy to build and sell housing was a bubble about to pop. His New York-based firm, Paulson & Co., made big bets predicting the edifice would soon come crashing down. The wager paid off in the first nine months of 2007, when Paulson’s Credit Opportunities funds rose an average of 340 percent.

That gain earned Paulson an estimated $1.14 billion in performance fees for the nine months ended on Sept. 28. Fees on Paulson’s other eight funds bring his total to $2.685 billion, which puts Paulson and co-manager Paolo Pellegrini at the top of Bloomberg’s ranking of best-paid hedge fund managers. Next on the list is Philip Falcone, whose New York-based Harbinger Capital Partners also bet against the housing boom and collected incentive payouts of $1.3 billion for the same nine months.

In third place was Jim Simons, president of Renaissance Technologies LLC in East Setauket, N.Y. (See “The Code Breaker,” also in this issue.) Simons made the list based solely on the performance of his $6 billion Medallion Fund, which rose more than 50 percent through Sept. 28, throwing off fees of more than $1 billion. Medallion, started in 1988, manages money almost entirely for Simons, 69, and his employees. From 1989 through 2006, Medallion returned an average of 38.5 percent a year.

Kenneth Griffin, chief executive officer of Citadel Investment Group in Chicago, was fourth. His firm manages $16 billion and returned 24 percent. Griffin has thrived by buying up distressed assets. Citadel, for example, took over the energy trades of Amaranth Advisors LLC after the Greenwich, Connecticut-based hedge fund collapsed in September 2006 under the weight of $6.6 billion in wrong-way bets on the price of natural gas.

read the rest published by Bloomberg here:

http://www.bloomberg.com/news/marketsmag/mm_0108_story2.html