Edward Lampert of the US-based ESL Investments earned an estimated $1.02 billion (£550m) in 2004, making him the highest paid hedge fund manager, according to rankings released today by Institutional Investor magazine.

Mr Lampert, was the first to crack the $1 billion mark in the four-year-old survey despite lackluster returns for the notoriously secretive hedge fund industry as a whole.

Hedge funds suffered their worst month in April since the collapse of Long Term Capital Management in August 1998, according to performance data published by Eurohedge, a trade magazine, this week.

The average return on a universe of more than 950 individual hedge funds was minus 0.5 per cent, the sharpest fall since the Russian default sent emerging markets into a tailspin seven years ago.

According to Institutional Investor, last year’s leading earner, George Soros, dropped to sixth place with $305 million in earnings down from $750.

The 25 hedge fund managers on the list reaped an estimated average of $251 million from fees and from gains on their investments in their funds. By comparison, the chief executive of a typical top 500 US corporation hauled in $10 million.

The magazine also estimated that Farallon Capital Management was the largest single-manager hedge fund firm in the world.

With $12.5 billion in capital at the end of last year, Farallon rose from fourth last year to dislodge Caxton Associates of New York, which held the top spot for the previous two years.

The London-based publicly-traded hedge fund firm Man Investments, came in at fifth place, with $11.1 billion in single-manager assets.

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