Hedge fund managers make a profit on housing crisis (Reuters) (07-04-2008)

BOSTON (Reuters) - While millions of Americans could lose their homes, there is a handful of fund managers who have turned a sizeable profit by betting against mortgages.

Among them is John Paulson, who ran a medium-sized fund until last year, at which time he decided that housing prices could decline on a national level, and that investment-grade mortgage bonds would be subject to default in record numbers, Paulson, 52, set a new record for payouts on Wall Street, industry analysts said.Paulson's $3 billion payout is equivalent to $26 for every U.S. household (114.4 million in 2006).

Following behind is Phil Falcone, 45, whose shrewd housing market bets at Harbinger Capital Partners netted him a $1.5 billion payout. Falcone, a former Harvard hockey star, also made headlines by demanding changes at the New York Times Co.

As a group, the 100-best paid hedge fund managers earned $30.3 billion last year, 26 percent more than they took home in 2006, the magazine reported.

Both Paulson and Falcone squeezed past Jim Simons of Renaissance Technologies and Steve Cohen of SAC Capital Advisors, perennial top earners who each took home between $1 billion and $2 billion in 2007.

John Arnold, who topped the 2006 list with a $1.5 billion payout he earned by taking the other side of a bet that felled Amaranth Advisors, made between $400 million and $450 million in 2007, the magazine reported.

Veteran oil trader T. Boone Pickens topped up his personal fortune with a $300 million to $350 million payout in 2007, a lot less than the $1 billion he took home in 2006.

 Source: Reuters