What it takes to become one of the world’s richest hedge fund managers
There’s long been no doubt that star hedge fund managers are richer than God. The top two dozen make more money than the 500 CEOs helming the behemoths that comprise the S&P 500 index, says Forbes.
Here’s a look at what the five richest hedge fund managers can teach us about amassing massive wealth. Note to MBAs with enviable internships, a PhD and a scrappy start may serve you better. (And it doesn’t hurt to be born in Queens and study philosophy.)
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Net worth: $20 billion
True title: One-man conglomerate
In a word: Ruthless
To be clear, the brash 77-year-old billionaire hasn’t won all his fortune from a hedge fund; Icahn Enterprises is a diversified holding company incomparable to any hedge fund. The Queens native cites his humble beginnings every chance he gets. Ambitious from the start, he earned a philosophy degree from Princeton and then went on New York University School of Medicine only to drop out after two years to join the army. Diversification has long been his fickle yet feisty game. After cutting his chops as a Wall Street broker in the early 1960s, he formed Icahn & Co., a securities firm that focused on risk arbitrage and options trading in 1968 and a decade later started taking control positions in individual companies. Swiftly earning a reputation as shrewd corporate raider, Icahn hasn’t mellowed with age as he continues to battle younger rivals like trading titan Bill Ackman. What can be considered his hedge fund is enjoying handsome returns (28% in 2012), while Icahn Enterprises’ investments in rail cars, retail, gaming and energy have been booming this year.
Net worth: $19.2 billion
True title: Family office philanthropist
In a word: Unapologetic
Two years ago the billionaire known for breaking the Bank of England ended an envied management run averaging a 20% annual rate of return more than four decades, when he returned money to outside investors. Today the chairman of Soros Fund Management oversees a $24 billion firm that manages his own money alongside the assets of his foundations. The Budapest-born Soros survived the Nazi occupation of Hungary and earned a PhD in philosophy from London School of Economics, toiling as a railway porter and as a waiter while studying under philosopher Karl Popper, who helped Soros develop a theory of reflexivity that would guide his early Wall Street trading days. Compelling often wishy-washy economist Paul Krugman to coin the term Soroi as a slight on the legendary billionaire’s market moving bets, 82-year-old Soros is unabashed by critics. Since 1979 Soros has donated some $8.5 billion to human rights, education and public health groups. Not forgetting his own roots and early struggles, he’s given away $6 billion to international causes and an estimated $400 million to fight poverty.
Net worth: $12.5 billion
True title: Prince of principles
In a word: Unflappable
A relative youngster, 64-year-old Dalio got his start as a kid, buying $300 worth of Northeast Airlines shares that tripled with a merger. Another Queens native, Dalio went to Long Island University before earning an MBA from Harvard Business School. He leapt quickly from the NYSE floor to start Bridgewater Associates, now the world’s biggest hedge fund with some $120 billion under management. Dalio has sold ownership stakes to his employees and clients, and wants to move his headquarters from Westport to Stamford where he will reign the turf of disgraced SAC Capital. The move would allow him to ramp up staff to 2,000. The Steve Jobs of investing practices Transcendental Meditation and donates money to the Tisch School of the Arts at NYU, the Dalio Talent Identification Fund, the World Community of Christian Meditation and Teach for America.
Net worth: $11.7 billion
True title: Code king
In a word: Scholarly
Retirement hasn’t slowed the "Quant King," who continues to play a quiet, albeit key, role at Renaissance Technologies, which has taken some hits this year. The MIT grad and math PhD worked as a researcher for the Communications Research Division of the Institute for Defense Analyses before teaching at MIT and Harvard. A code breaker, who was asked by IBM in 1973 to attack the block cipher Lucifer (a precursor to the Data Encryption Standard), has parlayed his academic prowess into market savvy. Born in 1938, he founded Renaissance in 1978 using computer modeling to find inefficiencies in highly liquid securities. He hires PhDs over MBAs and keeps close his craft, chairing Math for America. Champion of autism research, his family's charitable foundation is devoting $38 million to find causes.
Net worth: $11.2 billion
True title: Titan of timing
In a word: Defiant
Paulson posted gains in all four of his firm’s main strategies in July as his Recovery fund recouped losses incurred in 2011. Not a big surprise from the man who became a billionaire, reeling in $3.7 billion, by short-selling subprime mortgages in 2007. Another Queens native (it must be something in the water), Paulson went to New York University to study creative writing, film production and (again) philosophy, but didn’t make the grades and his father sent him on a South American road trip. He returned to NYU two years later, graduating summa cum laude from New York University's College of Business and Public Administration. This type of dramatic shift, whether in personality or behavior, has been an underlying theme in Paulson’s career. The 57-year-old titan has weathered many market storms, often emerging stronger, yet he grapples with the public persona that accompanies his fame and fortune. He’s not shy about telling the media when he’s displeased by events like Occupy Wall Street protestors picketed his townhouse in 2011. He’s far less conflicted by his public philanthropic side. He donated $20 million to NYU in 2009, $5 million to a hospital, near his summer home, $15 million to a new maternity hospital in Guayaquil, Ecuador, where his father was born and has pledged $100 million to the Central Park Conservancy.
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