LONDON (Reuters) - Bets on a U.S. housing crisis earned hedge fund manager John Paulson $3.7 billion in 2007, ahead of industry legend George Soros and 2006's highest-paid manager James Simons, according to Alpha Magazine.

Paulson, whose bet that investment grade mortgage bonds would be subject to default in record numbers came good in the subprime meltdown last summer, was one of five managers earning more than $1 billion, Alpha said in a note on Wednesday.

His earnings were more than double those of 2006's top earner -- mathematics professor-turned-investor James Simons, who founded Renaissance Technologies Corp -- who in 2007 earned $2.8 billion.

George Soros, whose Quantum Endowment Fund returned 32 percent last year, earned $2.9 billion.

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The top 25 managers earned, on average, $877 million in 2007, up from $532 million in 2006.

This "may well prove to be the greatest display of individual wealth creation in any year in the modern history of finance," Alpha said in the note.

(Reporting by Laurence Fletcher, editing by Will Waterman)