Top 25 Hedge Fund Managers' Avg. Compensation Exceeds $1 Billion

2009 Hedge Fund Manager Compensation Sets Record

According to Absolute Return magazine, the top 25 hedge fund managers earned $25.3 billion in 2009, $3 billion more than the previous record set in 2007. Hedge fund managers typically get most of their income from an incentive fee (percentage of the funds returns) as well as gains on their personal investments in their funds. Strong overall equity markets in 2009 contributed to strong earnings for thousands of hedge fund managers, not just the top 25.

The top hedge fund manager in terms of 2009 compensation was David Tepper of Appaloosa Management who made large bets that the US govt. would not let large banks fail as well as a successful investment in AIG. Tepper's to-big-to-fail bet paid off in the amount of about $4 billion in total compensation. Behind Tepper in second place overall, was billionaire investor George Soros and his hedge fund Quantum Endowment. Soros made over $3 billion in investment gains and fees. Renaissance Technologies' James Simon was third on the 2009 Top Hedge Fund Earners List.

Congress Shows Hedge Funds Some Love

The Waxman Witch Trial came to an abrupt halt as major hedge fund managers appeared before Congress. Though they were briefly asked about the systemic risks posed by hedge funds, Congressional members, Democrat and Republican, seemed to buy the argument that hedge funds pose far less systemic risk than the mainstream financial community.

Those managers present for the hearings were George Soros, Renaissance Technologies' Jim Simon, John Paulson Philip Falcone of Harbinger Capital and Ken Griffin of Citadel.

Another issue at stake was carried interest- A share of any profits that the general partners of private equity and hedge funds receive as compensation, despite not contributing any initial funds. This method of compensation seeks to motivate the general partner (fund manager) to work toward improving the fund's performance. Soros and Simons agreed that carried interest should be taxes as ordinary income, while Paulson, Falcone, and Griffin disagreed.

The hedge fund managers also supported more transparency, as long as that transparency applied only to regulators and not in " In the New York Times."

Democrat Jim Cooper noted, "The headline of this hearing is definitely Paulson vs. Paulson."

That seemed to be taking it too far for John Paulson who said, "I in no way want to be critical of Secretary Paulson," he said. "He's done a great deal for this country. He's willing to change his positions when the circumstances change."

I must say that while hedge funds are not primarily responsible for the current crisis, the sytemic risk posed by hedge funds is very real and should not be taken lightly.

Renaissance Technologies Firm Profile

Renaissance Technologies Profile

Renaissance Technologies is a hedge fund founded in 1982 by James Simons. Renaissance is known for using advanced scientific and technological techniques to execute rapid trades in liquid securities. These quantitative trading methods rely on looking for inconsistencies is historical price data. Renaissance employs hundreds of non-financial specialists including physicists, mathematicians, and astrophysicists, to help develop their hedge fund trading programs. Renaissance Technologies employs over 300 people and has more than $30 billion AUM.

Beginning in 1989, Renaissance Technologies’ Medallion Fund has averaged a 35% annual return, and is said to be one of the most successful funds in history. Because of its success, Renaissance charges a management fee of up to 5% and an incentive fee of more than 40 % in some cases. This is a far higher hedge fund fee structure than the 2/20 industry standard.

In September, 2008 Renaissance wrote a letter to the SEC discouraging them from forcing institutional investors to disclose their short positions, arguing that disclosure would force investors to alter their trading artificially just to avoid disclosure.

Renaissance has offices in Long Island, New York, San Francisco, London and Milan

Renaissance AUM: 30 billion

Renaissance Employees: 300

Key Renaissance People:
Founder, Director, CEO: Jim Simons
Chief Operating Officer: Stephen Daffron
Head, Futures Research: Robert Lourie
Vice President of Research: Henry Laufer


Rennaissance Technologies Addresses:
New York
Renaissance Technologies LLC
800 Third Avenue
New York, NY 10022
USA

Long Island
Renaissance Technologies LLC
600 Route 25A
East Setauket, NY 11733
USA

San Francisco
Renaissance Technologies LLC
Pier 5, The Embarcadero, Suite 101
San Francisco, CA 94111
USA

London
Renaissance Institutional Management (UK) Limited
25 Hanover Square
London W1S 1JF
ENGLAND

Milan
Renaissance Institutional Management (UK) Limited
Via del Lauro, 7
20121 - Milano
ITALY

Renaissance Phone:
(212) 486-6780