Paulson Closes Gap On Soros In Top 10 Hedge Funds

John Paulson moved closer to becoming the largest generator of profits for investors among hedge funds.

Thanks to strong performance in 2010, Paulson has generated $32.2 billion gains since he founded his firm, Paulson & Co. in 1994, according to estimates from LCH Investments NV. This puts him less than $3 billion away from George Soros’s Quantum Endowment fund, whose various iterations have generated $35 billion in net gains since its 1973 inception.

In other words, it has taken Paulson 21 fewer years to generate nearly the same profits as Soros.

When we first published this list two weeks ago —which covered the period through June 2010—Paulson trailed Soros by more than $5 billion.

Ray Dalio’s Bridgewater Pure Alpha, launched in 1975, remained in third place, with $22 billion in net gains.

However, at year-end, Baupost Group’s Seth Klarman moved up a notch, to fourth place, with $15.6 billion in net gains after racking up net returns of roughly 13 percent in 2010.

Klarman is followed by Appaloosa’s David Tepper, who jumped two notches to fifth place with $14.5 billion in profits, thanks to strong gains in 2010. His offshore Palomino fund was up 27.7 percent while his newer Thoroughbred fund was up 22 percent.

Meanwhile, Bruce Kovner’s Caxton dropped two notches, to sixth place with $13.1 billion.

It was followed closely by Moore Capital Management Partners ($13 billion), which moved up a notch, and Brevan Howard Fund ($12.5 billion), which dropped two places after generating a 0.7 percent return in 2010.

State Cohen’s SAC Capital dropped off the top-10 list altogether after generating close to a 16 percent return in his flagship fund.

Instead, Farallon Capital joined the list, placing ninth with $12.2 billion.

Rounding out the Top 10 once again is Ed Lampert’s ESL Partners with $12 billion in net profits.