Friday, March 30, 2012

Highest Paid Hedge Fund Managers

In 2010, John Paulson topped the list in hedge fund manager earnings with $ 4.9 billion.

The Advantage Plus Fund he manages returned 17% that year.

In 2011, he steered the same fund to a 51% loss.

Paulson Advantage Plus Fund Drops 51% in 'Aberrational Year'

So that means he didn't top the list in pay among hedge fund managers in 2011.

Here's who did.

The Rich List

1 Raymond Dalio (Bridgewater Associates): $ 3.9 billion
2 Carl Icahn (Icahn Capital Management): $ 2.5 billion
3 James Simons (Renaissance Technologies Corp.): $ 2.1 billion
4 Kenneth Griffin (Citadel): $ 700 million
5 Steven Cohen (SAC Capital advisors): $ 585 million

Pay For Top-Earning U.S. Hedge Fund Managers

The top 25 hedge fund managers in pay earned a combined $ 14.4 billion. So their average pay came in at $576 million per manager last year.

That's down from $883 million in 2010.

I guess that makes 2011, at least by comparison, quite a bargain.

What I'd like to focus on here is not the gains that come from the money these managers have invested in their funds (especially if those invested funds DID NOT come from accumulated fees charges in prior years) but, instead, on the money made from the hedge fund industry standard "2 and 20" compensation structure.
(This type of compensation structure includes a management fee that's 2% of assets under management. It also includes, when applicable, a performance fee for 20% of the profits -- sometimes above a certain threshold -- or some similar variation.)

A good chunk of the above earnings comes from fees though, of course, this varies greatly by fund.

There shouldn't be much ambiguity as to how I view these frictional costs based upon prior posts.

To me, the idea of paying someone even 1% to manage money seems expensive.

Frictional costs gone wild.

Adam

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