Hedge funds managers who won big by betting that credit markets would slump say they are not seeing reasons to change their bets, despite a stabilizing stock market.

We don't think by any means it is all over, said Norman Cerk, partner in Balestra Capital Partners LP, a New York hedge fund group with about $400 million under management. We're in the fourth inning of a game that could go into extra innings.

Cerk is not concerned for his fund, however. The fund is up about 115 percent year to date and 15 percent in August, according to investors who have seen the results.

Cerk would not comment on his fund's performance, citing regulatory restrictions. But Balestra is not the only firm winning big from the ongoing turmoil in the credit markets.

Among the most prominent is Paulson & Co, a New York money manager with about $23 billion in assets. The firm's Credit Opportunities Fund surged 27 percent in August, putting it up 410 percent in the year to date, according to sources, and giving it stratospheric gains by any standard for a multi-billion dollar fund.

Paulson declined to comment on the firm's outlook, but other fund managers were less reticent.

Lahde Capital Management, a Santa Monica, California, firm with about $60 million under management, surged nearly 8 percent in August, also giving it gross returns of 410 percent year to date in its Series A strategy, according to a September 7 note to investors.

Lahde made big bets that credit indices would fall. The ABX, which tracks baskets of bond issues, and other indices plummeted in recent months as concerns spread about widening home-loan credit defaults.

Lahde this month launched a new fund called Commercial Real Estate Hedge LP, which is shorting commercial mortgage-backed indices (CMBX) on the view that the commercial real estate market could face problems similar to those of the residential market.

Everything tells me the ABX is going to fall further, as is the CMBX, the equity market, the dollar, Lahde said in the note. There isn't enough lipstick in the world to sell a pool of subprime loans right now. No one is buying.

Other top performers include MKP Capital Management, a $5.2 billion hedge fund group that bets heavily in credit strategies. One of MKP's fixed income strategies was up as much as 14 percent since June 1 and 32 percent year-to-date, according to an investor.

Tony Lembke, MKP principal, said he welcomed the increased market volatility in recent months and is betting on further strains in the credit markets this year. He declined to discuss his firm's returns.

The volatility across markets has shaken up historical correlations and relationships among asset classes, particularly bonds and currencies, said Lembke.

Harbinger Capital Partners, which has about $12.25 billion in hedge fund assets, is also posting strong gains in various arbitrage and event-driven strategies.

Harbinger surged some 57 percent year to date through August 24 and gained about 3.6 percent in the month to that date, according to investors. Harbinger declined to comment.

Some funds are taking cues from the credit markets to win big in equities, such as Sandler Capital Management, a New York firm with more than $600 million in hedge fund assets. One of its funds, Plus Offshore Ltd, was up 3.7 percent in August, giving it year-to-date gains of 33.9 percent, according to investors.

We paid attention to the credit markets in late June and heeded the warnings, said Andrew Sandler, portfolio manager.

He said the firm in particular shorted potential leveraged buyout candidates on the view that potential private equity buyers would be thwarted from buying those companies because of financing challenges. He said the firm hasn't changed its view that there is more credit turmoil ahead.

We haven't gotten any new signals, either positive or negative, in the credit markets, said Sandler.

California Investment