Paulson trio share £12m payday despite profit falls

Three directors at Paulson Europe, the London-based arm of one of the world’s best known hedge funds, have scooped a near £12m payday.

The business, controlled by US hedge fund star John Paulson, made a profit of £26.5m in the year to the end of March 2011, the Telegraph reports.

The fund’s highest paid director – likely to be Paulson Ltd, the parent group – received nearly £15m.

The payouts come as profits at Paulson Europe fell, down from £32m in 2011, while revenues were down 5.4% to £36.9m.

Despite that performance, staff costs at the hedge fund rose sharply, up from £5.6m in 2010 to £8.4m. The fund’s 11 staff received average compensation of £760,000, according to the Telegraph.

Profits last year are thought to have been generated in part by short positions on European banks during the debt crisis.

Paulson made huge profits betting against British banks in the run up to Lehman Brothers’ collapse in September 2008 before reversing his position and betting on their recovery.

However, he is best known for his bet on the collapse of the US sub-prime mortgage market, which netted him over $3bn (£1.9bn).

Since then Paulson’s firm has not been immune from challenging conditions for the hedge fund sector, with his $3.4bn Advantage Plus fund losing 52% in the year to December, according to reports, and his Advantage fund down 36%.

Paulson wrongly bet that the American economy would recover in 2011, backing companies including Bank of America and Hewlett Packard, and holding a large position in gold.