ESL Investment's Edward Lampert, 2004's highest-paid hedge fund manager.

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NEW YORK (CNN/Money) - Retail deal maker Edward Lampert, who used his sizable stake in Kmart Holding Corp. and Sears, Roebuck & Co. to merge the two fledging chains, pocketed over $1 billion last year, making him the highest-paid hedge fund manager in 2004, according to a survey published Friday.

Lampert, who heads ESL Investments, saw his majority interest in Kmart more than triple last year and his Sears shares surge 12 percent, according to Institutional Investor's Alpha Magazine's list of the 25 best-paid hedge fund managers.

Through ESL Investments, Lampert has the controlling interest in Kmart and a 15 percent stake in Sears and merged the two retailers in an $11 billion deal last November. The new entity is now known as Sears Holding Corp (Research).

The magazine said Lampert was the first hedge fund manager to crack the $1 billion mark since the list's inception four years ago.

The minimum threshold for making the top 25 this year was at least $100 million in earnings, with this year's top 25 average of $251 million, the survey said. That was up from the 2004 list's average of $207 million and the prior year's average of $110 million.

The average Fortune 500 chief executive pay last year was $10 million, according to the magazine.

While hedge funds in general saw annual growth rates of just over 8 percent last year, Alpha attributed the surge in top manager's pay to excellent performance among the fund's they managed and the tendency for managers to have big sums of their own cash at stake.

The survey said much of the newfound wealth is being spent on high end art and real estate in New York City, helping to buoy those markets.

Rounding out the list's top five were James Simons of Renaissance Technologies Corp. ($670 million), Caxton Associates' Bruce Kovner ($550 million), Steven Cohen of SAC Capital Advisors ($450 million) and Appaloosa Management's David Tepper ($420 million).

For more on Lampert and the Kmart/Sears deal, click here.