The hedge fund arm of Investcorp, the asset manager firm based in Bahrain, is to work with the legendary US fund manager John Paulson to launch a new fund to capture an eventual upturn in the credit markets, according to the Daily Telegraph. Mr Paulson, the founder of Paulson & Co, was the best paid hedge fund manager last year, taking home an estimated $3.7 billion after successfully betting on the collapse of sub-prime mortgages, one of the few high-profile investors to have profited on the woes of the sector. Investcorp will use its new Credit Opportunities Fund to make strategic investments in the mortgage and credit sector. Investcorp is best known in the UK for its private equity business. Investcorp's fund of hedge funds business has assets of $8 billion under management, with $2 billion of those added in the past 12 to 18 months as a result of its successful bets against the sub-prime mortgage sector.