Hedge-Fund Managers Score Biggest Ever Payday

It's a good day to be a hedge fund manager.

Institutional Investor's Alpha magazine has just released it's annual ranking of top hedge funds earners, and some of the salaries are astounding.

At the top of the list is Paulson & Company founder John Paulson, who made a whopping $3.7 billion last year.

The New York Times reports on the hedge fund bonanza:

[Hedge fund managers'] unprecedented and growing affluence underscores the gaping inequality between the millions of Americans facing stagnating wages and rising home foreclosures and an agile financial elite that seems to thrive in good times and bad. Such profits may also prompt more calls for regulation of the industry.

Even on Wall Street, where money is the ultimate measure of success, the size of the winnings makes some uneasy. "There is nothing wrong with it -- it's not illegal," said William H. Gross, the chief investment officer of the bond fund Pimco. "But it's ugly."

The richest hedge fund managers keep getting richer -- fast. To make it into the top 25 of Alpha's list, the industry standard for hedge fund pay, a manager needed to earn at least $360 million last year, more than 18 times the amount in 2002. The median American family, by contrast, earned $60,500 last year.

Combined, the top 50 hedge fund managers last year earned $29 billion. That figure represents the managers' own pay and excludes the compensation of their employees. Five of the top 10, including Mr. Simons and Mr. Soros, were also at the top of the list for 2006. To compile its ranking, Alpha examined the funds' returns and the fees that they charge investors, and then calculated the managers' pay.

The Wall Street Journal adds:

Those who know the hedge fund business won't be particularly surprised that there were so many outsized successes. Hedge funds make the most money when there's a lot of volatility in the markets, and 2007 provided that with the roller coaster credit crunch. The glaring caveat is that hedge funds can make money in those roiling markets as long as they can stay in business. The markets are fickle, and the threat is that today's successful strategy can be tomorrow's liquidation, as the collapse of Peloton Advisors proved. As they say in those fund documents: Past results are no guarantee of future returns.

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The top ten earners, as reported by Alpha Magazine, are as follows:

1 John Paulson, of Paulson & Co., earned $3.7 billion

2 George Soros, of Soros Fund Management, earned $2.9 billion

3 James Simons, of Renaissance Technologies Corp., earned $2.8 billion

4 Philip Falcone, of Harbinger Capital Partners, earned $1.7 billion

5 Kenneth Griffin, of Citadel Investment Group, earned $1.5 billion

6 Steven Cohen, of SAC Capital Advisors, earned $900 million

7 Timothy Barakett, of Atticus Capital, earned $750 million

8 Stephen Mandel Jr., of Lone Pine Capital, earned $710 million

9 John Griffin, of Blue Ridge Capital, earned $625 million

10 O. Andreas Halvorsen, of Viking Global Investors, earned $520 million

But as Alpha warns:

Glory can be fleeting. Five managers from last year's top 25 are now officially, well, last year's news, including billionaires Edward Lampert of ESL Investments and Caxton Associates' Bruce Kovner.

See a list of who was considered a top earner last year, but has since fallen off.

Comments

[zizyphus]

Youngsters seeking a life of crime would be well advised to pursue investment banking.

[WIpatriot]

Legalized theft, why not?

[robinhood1]

If our society starts to unravel, the billionaire hedge fund managers will be no safer than the French nobility were after the storming of the Bastille. Those who did not flee the country in time were often executed, as were the King and Queen of France. Maybe some of these guys ought to quit while they are ahead, move to a quieter part of the world and keep a low profile. The US does not have a Bastille to attack, but it does have the Plaza Hotel and 747 Park Avenue, symbols of the super rich. Then, there is the entire town of Greenwich, CT.

Remember, even a Rothschild was gassed at Auschwitz (Robert, the French industrialist).

[WIpatriot]

If?

[mmckinl]

And this doesn't include the payroll taxes for those who actually work for a living.

[fedup07]

yeah, and Bushie Pie made it law that hedge fund managers only have to pay 15% tax rate for their income earned.

middle-class families = 25-33% tax rate
greedy hedge fund & Bush cronies =15% tax rate

[NicoleAnonymous]

The hedge fund managers were upset because they thought there might be more regulations on them now that it's clear the Fed will going to help out investment banks with taxpayer's money but they don't have to worry - nothing will change for them. They can still claim their company is based in the Cayman Islands so they don't pay as much taxes and they can still find a way to prevent smaller investers from withdrawing money when they're not doing good because the fact is our government wants conmen to be successful.

There was also an article in the Financial Times about how they make their money from fees and being successful at a hedge fund has more to do with luck than skill. You could put a child in charge of a hedge fund and as long they still charged fees, the child would probably do just a well as any highly paid hedge fund manager.

[ReasonIsMyReligion]

When is enough enough?

[WIpatriot]

Ever play Monopoly (tm)?

[roybatty]

Well put! Only problem is that if anyone mentions government regulation they're immediately branded an anti-American, enemy of freedom and democracy, commie, valley kook.

[monty]

It's all just a pyramid scheme, let's be real.

[dgscol]

Hedge funds are stock trades that have no rules and are available only to the wealthy. They should be outlawed. A little volatility is good, too much is ruinous to markets and companies. They need to be better regulated.

[LivingStardust]

To all you dipshits defending these crooks, keep on posting. We the People like to know the enemy.

[feo]

I thought a "hedge fund" was money you saved up to buy plants and bushes for the front yard. No?

[GreedyOldPsychopaths]

Bush, shrub, hedge: different names, same outcome.

[AurigaRa]

Now that Chelsea Clinton is working for a NY hedge fund, she can use it campaigning to show, no, SHE is the elitist, not her parents..

[rbspickles]

I guess when our cupboards are bare we can....."Eat the Rich!"

[aj4321]

Let's not make too big a deal out of this. These people have taken huge risks. If they had been wrong, they would be in a bread-line in YMCA. For every success story, there are dozens of failures in the hedge-fund industry.

[GoLeftGoDeep]

-- If they had been wrong, they would be in a bread-line in YMCA --

you skipped the fine print? no, if they are wrong the clients pay ... the managers go on to other bets ...often getting 20% to manage their clients' money and 20% of any profits ... losses are carried by the cients

[RodgerLodger]

Good point: they take advantage of their clients--those widows and elderly, generally gullible people who invest in hedge funds.

[Podewumun]

"...there are dozens of failures in the hedge-fund industry."

BOO FUCKING HOO

Are you an idiot, or just a black-hearted bastard?

[Spanky]

http://www.youtube.com/watch?v=9KReZyAZLI0&feature=related



"The search of the young today is more specific than the ancient search for the Holy Grail. The search of the youth today is for ways and means to make the machine-and the vast bureaucracy of the corporation state and of government that runs that machine - the servant of man. That is the revolution that is coming. It could be a revolution in the nature of an explosive political regeneration. It depends on how wise the Establishment is. If, with its stockpile of arms, it resolves to suppress the dissenters, America will face, I fear, an awful ordeal."

-- William O. Douglas, Points of Rebellion, 1969, p96

[LivingStardust]

Douglas was right, of course.

[robivecchi]

I hope I am not the only one who has a problem with the wording in this list. I don't believe a single one of them "EARNED" anything; same goes for the word "made" when used in this context. Manipulation of language has become de rigueur in our world. If the phrase "was paid" replaced "earned" then perhaps people might ask: "paid for what?" What kind of effort does one put into managing a hedge fund that could possibly merit a $3.7 billion pay check?

You talk about risk! Working in a coal mine involves risk. Working on the construction crew building a skyscraper involves risk. Living in a neighborhood with a grossly underfunded police force involves risk. Driving over certain highway bridges in our nation involves risk.

There are many occupations and activities which involve risk but managing a hedge fund is not one of them.

[robinhood1]

Heads, the hedge fund people make billions. Tails, the government gets to clean up the mess, a la Bear Stearns. If the effects of hedge fund losses could be confined only to these funds, it would be one thing. Unfortunately, a lot of little people are getting hurt, from the thousands of low level employees at the banks and brokerage firms who are losing their jobs, to the households whose home values are deteriorating because their neighborhoods are filled with foreclosed homes. The leverage employed by the hedge funds is far greater than the 10% margin requirements of 1929 at the time of the stock market crash. It seems that the hedge funds are only part of a perfect storm that is hitting the US right now. To the hedge fund mess, we can add in the growing national debt, large annual deficits, a war in Iraq with no apparent end in sight and a Medicare funding crisis looming in just a few years. I don't know why anyone would want to run for President.

[Podewumun]

Where's that "cake"? I'm hungry.