NEW YORK ( TheStreet) -- Hedge fund manager John Paulson has reportedly earned $1 billion on his investment in Citigroup ( C) since an initial investment in mid-2009.

According to a note sent to clients this month that was reviewed by Bloomberg, Citi was his fund's most profitable holding in 2010. Paulson's hedge fund held 424 million Citi shares as of Sept. 30, according to regulatory filings. When it initially put money into Citi, the stock was trading around $3, but has been closer to $5 in recent months.

"Citigroup demonstrates the upside potential of many of the restructuring investments we have added to our portfolio and our ability to generate above-average returns in large positions," Paulson said in the letter, according to Bloomberg.

Paulson spokesperson declined to comment or confirm whether the information was accurate.

Paulson's Paulson & Co. hedge fund has gained a reputation - and in some quarters, notoriety - for making astute bets on the financial sector.

Its bet against the housing market earned the firm tremendous profits in 2008 and, since then, its purchases of financial stocks on the cheap have produced bounties as well.

Though not accused of any wrongdoing, Paulson was mentioned in the Securities and Exchange Commission's accusations against Goldman Sachs ( GS) last year as a counterparty to a collateralized debt obligation in which long investors lost money. Paulson had a hand in picking mortgage-backed securities used in the deal, though the long investors were apparently unaware of that.

Paulson also holds equity in JPMorgan Chase ( JPM), Wells Fargo ( WFC), Bank of America ( BAC), SunTrust ( STI) and Capital One ( COF), among others.

Citi shares were down 0.5% at $4.81 in recent trading.

>>>Read More: John Paulson's Top 10 Financial Stocks

-- Written by Lauren Tara LaCapra in New York.

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