here are a few reactions:
1. can i trust this 240 mill figure? what if last year they lost 190 mill, and over the last 10 years they're batting even?
2. what if they're just charging too much in fees?
3. what if none of the money is liquid?
4. what if they're not happy people -- money doesn't buy everything, does it? :)
Ok, so I attempted to track down this alpha list, but didn't feel like subscribing to the magazine. Here is what I found online (not particularly interesting, but whatever...):
The Alpha Hedge Fund Compensation Report reveals the truth about hedge fund salaries. Based on the results of questionnaires completed by nearly 900 professionals from more than 600 firms, now you can find an answer to the question, “What are hedge fund professionals really making?” If you work at a hedge fund or fund-of-funds firm, this is your chance to find out whether you’re being shorted; if you work in another industry, our findings may prompt you to consider a career change.
The Alpha report rips through the shroud of secrecy surrounding hedge fund compensation. We found that compensation varies widely within the hedge fund industry and is correlated to several factors, including firm asset size and geographical region. Job function and title also play an important role, but in general we can safely say that when it comes to hedge funds, 2 and 20 equals a hefty salary. (see the site)
And here are the top three money-makers (and the site claims to profile more tomorrow, see the end of the block quote):
JAMES SIMONS
Renaissance Technologies Corp.
$1.7 BILLION
EVEN THE MOST SUCCESSFUL hedge fund managers have to shake their heads in wonderment at the extraordinary continued success of Renaissance Technologies Corp. founder James Simons. Last year his $6 billion Medallion fund posted a 44 percent return after fees, easily exceeding its roughly 36 percent average annualized net return since he launched the quant-based fund in 1988. What makes his performance all the more impressive is that the 69-year-old Simons, who has a Ph.D. in mathematics from the University of California, Berkeley, and once worked as a code breaker for the U.S. Department of Defense, charges a hefty 5 percent management fee and 44 percent performance fee. (The gross return was an astonishing 79 percent.) With $1.7 billion in estimated earnings, Simons tops our list of the best-paid managers for the second straight year.
Medallion, which is closed to outside investors, uses sophisticated computer programs to identify price anomalies, trading everything from equities and commodities to futures and options. An acclaimed mathematician, Simons has hired about 80 Ph.D.s at Renaissance's offices in Manhattan and East Setauket, New York, to find ways to enhance his firm's existing strategies and discover new ones. In August 2005 he launched the Renaissance Institutional Equity Fund, a long-short product that invests exclusively in equities and has a longer holding period for its securities than does frenetic Medallion. By maintaining a net exposure to the market of 100 percent, RIEF has been popular among institutional investors looking for higher returns from their traditional equity allocation. The fund has quickly grown to $20 billion, or one fifth of its stated $100 billion capacity; it was up about 20 percent last year.
Simons, who has said publicly that most of the researchers Renaissance has hired in the past seven years were educated outside the U.S., is a major proponent of boosting math skills. He was named to the National Mathematics Advisory Panel by President George W. Bush's administration to suggest ways to advance the teaching of math and is the founder and chairman of Math for America, a nonprofit organization whose mission is to improve math education in U.S. public schools.
In February, Simons received an award from software and IT solutions company SunGard and the International Association of Financial Engineers as their 2006 financial engineer of the year. At the award dinner, which was held at the United Nations, in New York, Simons told the crowd that although he was flattered to receive the prize, before getting it he never really thought of himself as a financial engineer. "At Renaissance we have lots of smart, imaginative people making lots of money," he said. "If that's financial engineering, I'm all for it."
KENNETH GRIFFIN
Citadel Investment Group
$1.4 BILLION
KENNETH GRIFFIN HAS COME A long way since he began trading convertible bonds from his dorm room in Cabot House at Harvard College. Griffin, who founded Chicago-based Citadel Investment Group in 1990, when he was just 22, is building an empire that has more in common with the business of another famous Harvard student -- Microsoft Corp. chairman Bill Gates -- than it does with most hedge funds. Nearly half of Citadel's more than 1,000 employees work in technology, developing and maintaining not only the firm's proprietary investment models but also its state-of-the-art hedge fund administration and electronic trading platforms. Citadel Execution Services, which trades an average of 150 million shares a day, has been offering market making to investors, including other hedge funds, since 2005. Citadel Solutions, which provides middle- and back-office administration services using the same technology developed for Citadel's own funds, opened for business just this spring.
The buildout of Citadel's non-hedge-fund businesses has fueled speculation that Griffin, now 38, is preparing to take his company public. The timing would be propitious. In 2006, Griffin enjoyed his best returns since 2002. Each of his two main funds -- Kensington Global Strategies and Wellington -- was up about 30 percent, net of Citadel's 20 percent performance fee. (The firm does not assess a management fee; instead, it charges all expenses to the fund.) The gains were spread across a variety of strategies, including long-short equities, quantitative, credit and energy. At least 5 percentage points of the firm's returns were directly attributable to the decision by Citadel to team up with JPMorgan Chase & Co. to buy, at a discount, the bulk of the energy portfolio of collapsed hedge fund Amaranth Advisors. At the end of 2006, Citadel had $12 billion in assets under management.
Griffin and his wife, Anne, who has her own hedge fund firm, Aragon Global Management, are among the world's biggest art collectors. Last year they paid $80 million for False Start, a 1959 work by Jasper Johns. In October the couple gave $19 million to the Art Institute of Chicago, which in turn will name the central court of its new Modern Wing, currently under construction, the "Kenneth and Anne Griffin Court."
EDWARD LAMPERT
ESL Investments
$1.3 BILLION
THE FORTUNE OF EDWARD Lampert rises and falls largely with the stock price of one company -- Sears Holdings Corp. At year-end his firm, Greenwich, Connecticutbased ESL Investments, owned 42.5 percent of the U.S.'s third-biggest retailer, accounting for nearly $11 billion of ESL's $14.6 billion stock portfolio. Lampert, who is chairman of Sears, acquired the stake in March 2005, when he merged Chicago-based department store chain Sears, Roebuck & Co. with discount retailer Kmart Holding Corp., which he had taken control of in bankruptcy two years earlier.
Although some critics have complained that Lampert is destroying Sears' iconic brand by cutting costs and not reinvesting in its core retail business, investors have applauded his focus on boosting profits rather than sales. The shares of Sears surged 45 percent last year, helping to power the former Goldman, Sachs & Co. arbitrageur back above $1 billion in earnings, after a falloff in 2005. (Lampert was the first hedge fund manager to breach the $1 billion barrier, in 2004.) Apart from ESL, two of Sears' ten biggest shareholders are hedge funds, New Yorkbased Atticus Capital and Perry Partners. Richard Perry, the co-founder of Perry Capital and a friend of Lampert's since they worked together in the merger arbitrage group at Goldman during the 1980s, sits on Sears' board of directors.
ESL's other two reported equity holdings were retailers AutoZone, whose shares rose more than 26 percent last year, and AutoNation, which finished the year roughly unchanged. ESL's nearly $18 billion hedge fund, however, rose 24.5 percent, net of fees, held down a bit by a multibillion-dollar cash position, say investors. Last fall Lampert announced that he would not seek reelection to the board of directors of AutoZone so he could devote more time to ESL and Sears. Last month he said he wouldn't seek reelection to AutoNation's board, for similar reasons.
Please visit us tomorrow where we profile: George Soros, Steven Cohen, Bruce Kovner, and Paul Tudor Jones II. (see site)
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