He probably is the best money manager in Boston you've never heard of. And Jon Jacobson would like to keep it that way, thank you.

For years, Jacobson lived with one day of fame a year in Boston, and it was the day he absolutely hated. That was the day each year when

Harvard Management Co.

, his employer, filed with the

Internal Revenue Service

what it paid its top employees. And then people like us would put it in the local papers.

Most money managers don't have to put up with that kind of Mickey Mouse stuff, but you do if you if work for the nonprofit money-management unit of

Harvard University

, the World's Greatest University with the world's greatest endowment ($13 billion). And year after year, Jacobson pulled down the biggest paycheck: $10.2 million last year, $7.6 million the year before and $4.8 million the year before that.

Those numbers were hard for world-class Harvard professors with world-class egos to swallow when they made just a tiny sliver of what Jacobson did. But then he was a money manager and they weren't, and life isn't fair. And among money managers at Harvard, he made the most year after year because his numbers were simply the best year after year.

For the fund's fiscal year ended June 30, 1998, his last year at Harvard Management, his domestic equity portfolio returned a stunning 45.4% compared with 30.2% for his benchmark, the

S&P 500

index. Over three years, he had an annualized return of 42.7% compared with 30.3% for the S&P.

Last year Jacobson decided he wanted a hedge fund of his own, where he could make even more money and not have to worry about reading about it in the papers. He had the numbers and the connections, but his timing turned out to be a little awkward: Just before he opened his fund, the disaster at

Long Term Capital Management

turned hedge fund managers from hot commodities into prime suspects.

Jacobson was far enough along in the process and had a strong enough reputation to get inside the window that was closing. In all, he raised about $1.5 billion, including $500 million from Harvard Management. Only the Revered One, former Fidelity

(FMAGX) - Get Report

Magellan manager Jeff Vinik, runs more hedge fund money in Boston.

Now running

Highfields Capital Management

(named boringly for the street on which he lives) from atop Boston's John Hancock Tower, Jacobson still isn't talking. But required federal filings give us a pretty good idea where he is putting his dough.

Jacobson has never been a big-picture investor, betting on which way the economy, interest rates or currencies are headed. Instead, he looks for special situations: merger deals where he can make money on arbitrage plays, industry pairs where he can go long maybe

General Motors

(GM) - Get Report

and short

Ford

(F) - Get Report

and beaten-up industries where there might be some catalyst for change.

Federal filings compiled by the

Carson Group

, a New York data house, show clearly that Jacobson hasn't lost his love of the merger game. Jacobson's biggest holding at the end of the year was

Telecom Italia

(TI)

, Italy's No. 1 phone company that has been pursued by

Olivetti

. No. 2 on Jacobson's list was

BP Amoco

(BPA)

.

Philips Electronics

(PHG) - Get Report

, which has made a bid for

VLSI Technology

(VLSI)

, and

Mobil

(MOB)

, which has agreed to sell itself to

Exxon

(XON) - Get Report

, come next on the list.

Unlike many market-neutral funds that try to minimize risk, Jacobson is running a highly concentrated portfolio, with just 56 long positions, according to the Carson Group. His biggest industry weightings are communication services, consumer cyclicals and energy. He has 45% of his money in big-cap stocks, 32% in mid-caps and 23% in small-caps, Carson says.

The returns have been modest so far. Jacobson started investing his money on Oct. 1, and he showed a return of about 6% for the fourth quarter, according to investors. The S&P was up 21.3% for the period, but Jacobson, operating from a standing start, would have spent much of that time with a fair amount of his money in cash.

Jacobson started his firm with two longtime friends, Richard Grubman of

Corporate Value Partners

in New York (the successor to the old

Coniston Partners

) and Kenneth Colburn, a former executive at

Raytheon

and

First Boston

investment banker. There are just 17 people at Highfields.

Look as you will, you won't find an interview anywhere, anytime on Jacobson's views on the market. It is not his way. And chances are great that his fund is too rich for your blood. Minimum investment: $5 million.

Steven Syre & Steve Bailey write for the Boston Globe. This column is exclusive to TheStreet.com. Under no circumstances does the information in this column represent a recommendation to buy stocks or funds.

As originally published this story contained an error. Please see

Corrections and Clarifications.