Institutional Investor's Alpha magazine releases its annual list of the top 25 hedge fund earners today. Among its insights: They make a lot of money.
Three hedge fund managers - James Simons of Renaissance Technologies, Kenneth C. Griffin of Citadel Investment Group and Edward S. Lampert of ESL - took home more than $1 billion each. Compared to those levels of compensation, points out the New York Times, the record-setting pay of investment bank chiefs like Goldman Sachs's Lloyd Blankfein look modest. (Blankfein earned $54.3 million last year, not including investment gains.)
Managers had to earn at least $240 million in 2006 to make Alpha's list. That's up from 30 million in 2001 and 2002, and nearly double the minimum required in 2005. Alpha's rankings take into account the manager's share of management fees and performance fees, and includes investment gains made on their own capital invested in their funds.
Another interesting point, as made by the Times's Jenny Anderson and Julie Creswell:
(If) the Internet age was defined by youth, the hedge fund age illustrates that experience indeed pays.
The average age of Alpha's top 25 was 51, with only four thirty-somethings on the list. Among them is John Arnold, the 32-year-old from Centaurus Advisors who amassed net gains of 200 percent last year.
Mr. Arnold hails from Enron's energy desk, where he received a lifetime of trading and other experiences. His $3 billion fund, among the largest energy funds in the world, racked up huge gains by taking the other side of a natural gas bet that caused Amaranth to lose more than $6 billion in a week.
But older, more familiar names dominate Alpha's list. Boone Pickens, the 78-year-old oil tycoon, made $340 million on the back of strong returns at his energy funds and Carl C. Icahn, 71, the reborn activist investor, made $600 million.