Fortress payouts are the exception not the rule

The huge payouts earned by the founders of Fortress Investments suggest working for a hedge fund is more lucrative than ever. Don't be deceived.

"Essentially, this is the start of a trend," says Mark James, a director in the alternative investments division at ABN AMRO. "But are we going to see a rush of other hedge funds coming to market in the near future? Probably not."

Partners in Fortress, the US private equity and hedge fund manager, made a killing when the company floated on the New York Stock Exchange last week. With a market capitalisation of $12.5bn and valuation equivalent to 40 times expected earnings, founding partner Wesley Edens' stake was worth $2.3bn on the first day's trading.

So is now the time to jump on the hedge fund bandwagon with a view to lining up equity in advance of similar flotations on the London Stock Exchange? James says it's not - for two reasons.

Firstly, equity in hedge funds tends to be focused in the hands of the few rather than the many. "At most reputable hedge funds and fund of funds, equity is tied up in a limited number of staff," says James, ie you're unlikely to get a mega-payout if you join a fund that's already established - the biggest bucks are reserved for those in at the start.

Secondly, James says most of the hedge fund floats that are taking place this side of the Atlantic are for so-called feeder funds, rather than their larger - and more lucrative - management companies. "Both Brevan Howard and Marshall Wace have chosen to test the water with feeder funds first," he says. "We've only had a few actual management companies - like RAB Capital - listing in London."

This doesn't mean the Fortress-style funds won't list in Europe one day, simply that they're unlikely to do so just yet. When that happens, a select few in the hedge fund community are likely to become very (very) rich, just don't count on it happening very often.