June 30, 2006

Hedge Fund Managers Sitting Pretty

It doesn’t take a genius to figure out that hedge fund managers are among the topmost earners in the world today. But just how much do the cream of the crop make?

Well, according to the Fifth Annual List of Top Hedge Fund Earners released by Institutional Investors’ Alpha Magazine, prizes for leading the list go to James Simons of Renaissance Technologies who took home a whopping $1.5 billion in 2005. His Medallion Fund earned a 30 percent return of $5.3 billion under his management. Close on his heels is BP Capital Commodity Fund’s with a pay packet of $1.4 billion. Other high earners include George Soros with $840 million, Steven A. Cohen of S.A.C. Advisors with $550 million, and Eddie Lampert with $425 million. 

Managers make so much money because they normally charge investors 2 percent of the assets under management and 20 percent of performance gains. But if your hedge fund is large enough, your performance does not matter; you can still go home with a significantly large pay packet, as demonstrated by Bruce Kovner of Caxton Yet. The fund has posted nothing but single digit returns over the past three years, but Kovner still earns $400 million annually. That’s the life!

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