The flagship hedge fund of John Paulson, the investor who famously bet on the collapse of the US subprime market, jumped by more than 12 per cent in September to more than recover from losses sustained in August, Reuters reported.

Paulson, who oversees a total of around $35 billion, told investors that his Advantage Fund rose by 12.41 per cent. His Credit Opportunities fund was up 3.94 per cent, while the Recovery fund gained 8.47 per cent and the gold fund returned 5.67 per cent.

Paulson benefitted from the stock market rally last month after posting mixed results in August, when the flagship fund lost more than 4 per cent.

The performances of hedge funds, which typically charge annual management fees of around 2 per cent and performance haircuts of 20 per cent, are under particularly tight scrutiny at present after the rollercoaster results recorded over the past two to three years. The sector was hit hard in 2008, recovered sharply in 2009, but has so far been, on average, relatively lacklustre in 2010 as markets have struggled to show a clear direction.

Chicago-based Hedge Fund Research’s HFRX Global Hedge Fund Index is up 1.78 per cent between the start of January and 4 October this year.