A new ranking of the highest paid hedge fund leaders bolsters fund proponents' claim that they can profit in good times and bad.
Trader Monthly magazine's latest annual top-earners list is headed by five individuals thought to have earned at least $1 billion each last year. While those titans owned their firms, the revenue that hedge funds earn through returns-based incentive fees often is included in compensation formulas for hedge fund employees such as portfolio managers - and sometimes even analysts and administrative staff. So the growth trend of general partners' pay may be a reasonable proxy for those who work under them.
In first place on the Trader Monthly list, earning an estimated $3 billion last year, is John Paulson. His Paulson & Co. was among the first significant players to anticipate the sub-prime mortgage collapse and bet heavily on that outcome by shorting the ABX index. Paulson's assets under management reportedly quadrupled last year to $29 billion, enough to catapult onto a separate list of the 10 biggest hedge fund firms compiled by Absolute Return magazine.
Interestingly, Paulson was once a banker at Bear Stearns, which helped trigger the sub-prime crisis last summer (when two Bear hedge funds went belly-up) and ultimately became its first major casualty.
Another high place on the Trader Monthly ranking went to Phil Falcone of Harbinger Capital. He pulled an estimated $1.5 billion - $2 billion, from both shorting the sub-prime market and pressuring managements of companies like the New York Times Co. to adopt shareholder-friendly measures.
There are five billion-dollar men on the Trader Monthly list, according to a recent Financial Times article. A year ago, a similar list published by Institutional Investor's Alpha Magazine showed three fund managers earned at least $1 billion for 2006. However, methods used to compile the two lists weren't necessarily identical.
Rounding out Trader Monthly's top five are the well-known fund titans, James Simons of Renaissance Technologies, Steve Cohen of SAC Capital and Ken Griffin of Citadel Investment. Simons' 2007 take was estimated at $1.5 billion to $2 billion, while Cohen and Griffin are thought to have earned $1 billion to $1.5 billion each.
Ranked sixth through tenth are:
- Chris Hohn, of London activist The Children's Investment Fund, at $800 million -900 milllion. Most of his income is donated to an affiliated charity, according to the Financial Times.
- Noam Gottesman and Pierre Lagrange, of London-based GLG Partners. Much of their respective $700 million - $800 million paydays resulted from taking their company public last June through a so-called reverse-merger deal that valued the firm at $3.4 billion.
- Alan Howard of London global macro trader Brevan Howard, at $700 million -$800 million.
- Paul Tudor Jones of Tudor Investment reportedly earned $600 million - $700 million last year, despite media reports of subpar returns or losses at his biggest funds.