Maggie's Farm

Hedgies: Brother, can you spare a dime?

From the NYT: ON average, according to Institutional Investor's most recent survey, the 25 best-paid hedge fund managers each took home $207 million in 2003, about double what they made a year earlier. That's $207 million in cash - not in equity or stock options. Meanwhile, the nation's 25 highest-paid chief executives each made an average of $37 million in total compensation last year, including options granted (but not those exercised), according to Business Week.

Most hedge fund managers do make money for their investors. But even if a hedge fund manager doesn't make a cent for his investors, the manager invariably makes a fortune for himself. Think about it: just for showing up to work, the manager of a hedge fund with $1 billion in assets is guaranteed to earn $20 million a year in management fees alone. Why should he take any risks? Why should he alienate his cautious investors? If we add in his 20 percent cut of the gains, and assume that his returns last year were just average (in line with the S.& P. 500) he would have grossed a total of $41.8 million." Gunslingers No More: The Cautious Cash In - New York Times