Homes crisis: City chiefs make £800m

Two hedge fund managers based in London paid themselves £400 million each last year.

It makes Noam Gottesman and Pierre Lagrange among the biggest winners from the global credit crunch that has left millions of British borrowers facing huge increases in the cost of home loans.

Figures today show house prices last month fell by their highest level since the property crash of 1992, prompting warnings of an "epidemic of repossessions" unless the Government steps in.

But Mr Gottesman and Mr Lagrange, founders of GLG Partners, have defied the global downturn that has forced banks to write off billions of pounds and lay off thousands of staff.

Mr Gottesman, 45, a British passport-holder of American-Israeli heritage, is believed to have several homes in Mayfair, Knightsbridge and Kensington and travels the world in a customised Boeing 737 jet. He once summed up his role at the firm as: "I make money."

His business partner Mr Lagrange is a 44-year-old Belgian who has a home in Oxfordshire which has been described as a miniature Buckingham Palace.

The two men head a list of Londonbased "masters of the universe" whose hedge funds have continued to make vast amounts of money.

According to research by Trader Monthly magazine, other big earners in the capital included Chris Hohn of TCI, who earned up to $900million (£ 456million), and Alan Howard of Brevan Howard Asset Management, who is said to have paid himself $800million (£406million). The credit crunch has led to the closure of several hedge funds on both sides of the Atlantic.

But some fund managers have made a killing from the crisis, following the example of Wall Street money manager John Paulson, 52, who has been touted as the George Soros of the sub-prime crisis.

Mr Paulson's funds are reckoned to have made $15 billion (£7.62 million) and he paid himself $3 billion (£ 1.52million) after making huge bets to force down the price of complex financial derivatives related to the packages of mortgage-backed securities that have proved so toxic to the major banks. Mr Soros - who made billions from destabilising the pound as sterling crashed out of the European exchange rate mechanism in 1992 when John Major was prime minister and Norman Lamont was chancellor - is said to have recently invited Mr Paulson to lunch to learn his secret.

Mr Gottesman and Mr Lagrange's pay packets are believed to dwarf their previous year's takings.

Some London hedge funds have been making huge profits from trading packages of sub-prime mortgage debt.

But others have made millions of pounds in profits in days by short sellingshares they think are going to fall. This involves agreeing to sell shares they do not yet own at a certain price then buying them in the market at a lower price a few days later to fulfil the transaction.

The last six months have seen massive "shorting" of shares such as Northern Rock and other banks.

Last month the Financial Services Authority and the Bank of England were forced to step in to quash rumours about the financial health of Halifax owner HBOS, which had sent the shares plunging nearly 20 per cent amid a wave of aggressive short selling.