John Paulson With $3.7 Billion Tops Alpha Magazine's

7th Annual Ranking of the Most Highly Paid Fund Managers
Soros and Simons, Second and Third Respectively
Paulson Bests Last Year's Top Earner by $2 Billion

New York, NY John Paulson, who labored for most of his career in merger arbitrage, earned a staggering $3.7 billion in 2007 shorting the subprime market. And he needs every bit of it to lead Alpha's annual ranking of the best-paid hedge fund managers.

Legendary investors George Soros and James Simons (last year's leader with $1.7 billion) are nipping at Paulson's heels, each earning nearly $3 billion in 2007. Paulson, Soros and Simons are among five managers who had more than $1 billion in earnings last year in what may well prove to be the greatest display of individual wealth creation in any year in the modern history of finance.

The enormous riches being generated by hedge funds comes at a time of extraordinary distress in financial markets, as millions of homeowners face potential foreclosure and the U.S. plunges into recession.

• The top 25 managers earned, on average, $877 million in 2007, up from $532 million in 2006. Five of the managers on this year's list each made more in 2007 than the $1.2 billion that JPMorgan Chase & Co. agreed to pay for the almost failed 85-year-old Bear Stearns Cos.

• When the inaugural list was published in 2002, Soros led the way with $700 million, a showing that this year would have put him at No. 9. Back then it took $30 million to crack the top 25; this year, $360 million.

• The grand total earned by the top 25 in our 2003 ranking, almost $2.8 billion, was less than what any of the top three managers made this year and less than one fifth of what the top ten made altogether ($16.1 billion).

• Though the list doubled in size this year from 25 to 50, managers needed $210 million to qualify for the ranking. Eight of the managers are based in the U.K., including GLG Partners co-founders Noam Gottesman and Pierre Lagrange, who each made $350 million in earnings. (apart from the $1 billion they got in stock and cash when GLG went public on the New York Stock Exchange last year in a reverse merger).

The Top Ten Highest-Paid Hedge Fund Managers:

Alpha uses two components to calculate earnings: managers' share of their firm's performance and management fees, as well as gains on their own capital. We exclude, however, any proceeds from the sale of a firm or from a public offering, which is more a reflection of managers' business acumen than of their investment prowess.