Top hedge fund managers still raking in the money

LONDON (CNNMoney.com) -- Despite turbulence in the financial markets and the global economic downturn, the world's 25 top-earning hedge fund managers raked in a staggering $11.6 billion last year, according to a ranking released Wednesday.

On average, the managers took home $464 million each, Alpha magazine's annual list of top hedge fund earners showed. By comparison, the average take home pay in 2007 was a whopping $892 million.

Leading the pack was James Simons of New York's Renaissance Technologies, who took home $2.5 billion in 2008. He was followed by John Paulson, who held the No. 1 spot in 2007. Paulson earned $2 billion last year.

In the No. 3 spot was John Arnold, founder of Centaurus Energy, who earned the bulk of his $1.5 billion through natural gas trading, according to Alpha. George Soros, who raked in $1.1 billion, and Raymond Dalio of Bridgewater Associates came in fourth and fifth, respectively.

Hedge funds are private investment funds that are targeted mainly at wealthy individuals and large institutions. They use a variety of investment methods, ranging from bets on currencies and mergers to traditional stockpicking.

The industry has come under scrutiny in recent years, however, for its secretive nature and for a particular strategy some funds employ known as short selling, or betting against a company.

Alpha compiles its list by measuring the share of the performance and management fees the managers receive and the gains they reap from their own investment in their funds.