For all the stories of hedge fund failures over the past year, fund managers at the top of the trill dollar industry did exactly what they are supposed to do in last year's crazy market: Make money. A lot of money.
New York-based Alpha magazine is out Tuesday with its authoritative rankings of the world's highest-earning hedge fund managers. The magazine found that its top 25 fund managers “took home, on average, an anything but average $464-million (U.S.) apiece in 2008.” The magazine, an arm of Institutional investor, details each manager's investment strategy on its website.
"The hedge fund industry has a well-deserved reputation for enormous wealth creation," says Michael Peltz, executive editor of Alpha. "But events of the past year have been a grim reminder that the hedge fund industry can also be a source of incredible wealth destruction."
Taken together, the 25 highest-earning hedge fund managers made $11.6-billion, making 2008 the third-best year on record since Alpha began compiling its rankings in 2000.
In a showing that makes a mockery of mandatory retirement, 70-year-old quantitative investor James Simons, founder of Renaissance Technologies, earned the No. 1 spot by making $2.5-billion in 2008. He's a former university math professor.
Last year's top earner, John Paulson at Paulson & Co., had to settle for second place with earnings of $2-billion, down from $3.7-billion in 2007, when he made a winning bet against the subprime mortgage market. Trading in natural gas made $1.5-billion for John Arnold, the 34-year-old founder of Houston-based Centaurus Energy. And Alpha found that legendary hedge fund manager George Soros, aged 78, earned $1.1-billion in part from a good call against the U.S. dollar.
Here is Alpha's list of take home pay for the top 10 hedge fund managers, with earnings calculated based on both the manager's share of their funds' fee income and the performance of their own capital invested in their funds:
1 James Simons Renaissance Technologies Corp. $2.5-billion
2 John Paulson Paulson & Co. $2-billion
3 John Arnold Centaurus Energy $1.5-billion
4 George Soros Soros Fund Management $1.1-billion
5 Raymond Dalio Bridgewater Associates $780-million
6 Bruce Kovner Caxton Associates $640-million
7 David Shaw D.E. Shaw & Co. $275 million
8 Stanley Druckenmiller Duquesne Capital Management $260-million
9 (tie) David Harding Winton Capital Management $250-million
9 (tie) Alan Howard Brevan Howard Asset Management $250-million
9 (tie) John Taylor Jr. FX Concepts $250-million
Not all the hedge funds got the market right. On Thursday, Alpha will roll out a list of eight of the biggest losers - managers who lost a combined $6.2-billion in personal wealth in 2008.
