Here are the top 10 managers for 2009 in terms of net compensation. The majority  of this comp is based on performance fees, plus investment returns on their own money.

The top 25 earners were paid a collective $25.3 billion. The lowest earner on the list earned a puny $350 million — a shanda! — making it embarrassing to even show his face at the country club. (What a loser).

Here’s your top 10 list:

Top Earning Fund Mangers

1.David Tepper, Appaloosa Management
Est. 2009 personal earnings: $4 billion

2. George Soros, Soros Fund Management
Est. 2009 personal earnings: $3.3 billion

3. James Simons, Renaissance Technologies
Est. 2009 personal earnings: $2.5 billion

4: John Paulson, Paulson & Company
Est. 2009 personal earnings: $2.3 billion

5: Steve Cohen, SAC Capital Advisors
Est. 2009 personal earnings: $1.4 billion

6. (tie): Carl Icahn, Icahn Capital
Est. 2009 personal earnings: $1.3 billion

6. (tie): Edward Lampert, ESL Investments
Est. 2009 personal earnings: $1.3 billion

8. (tie): Kenneth Griffin, Citadel Investment Group
Est. 2009 personal earnings: $900 million

8. (tie): John Arnold, Centaurus Advisors
Est. 2009 personal earnings: $900 million

10. Philip Falcone, Harbinger Capital Partners
Est. 2009 personal earnings: $825 million

All data, NYT, Absolute Return + Alpha.com

>

As I have noted in the past, I have no problem with anyone making absurd amounts money of who actually earned it through their skill or creativity or business acumen. If you create something (Search engine, iPhone, etc.) or if you are an being outstanding investor or stock picker or trader, so be it.

My issue is with the people who rape and pillage their charges, leaving a destroyed firm behind, and the bills covered by the shareholders or taxpayers.

>

Source:
Pay of Hedge Fund Managers Roared Back Last Year
NELSON D. SCHWARTZ and LOUISE STORY
NYT, April 1, 2010  
http://www.nytimes.com/2010/04/01/business/01hedge.html

Category: Hedge Funds, Wages & Income

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

43 Responses to “Top 10 Hedge Fund Managers 2009 Salary”

  1. rktbrkr says:

    Finally Fed disclosure of maiden Lane holdings. Lots of research required to get at the meat! Fed claims they’re above water on these. LARGE smirk here

    http://ftalphaville.ft.com/blog/2010/04/01/194061/maiden-lane-goes-public/

  2. jjay says:

    I would be intersted to know how much those 10 pay in income taxes out of all that money.
    They all seem to set up “foundations” and “charitable trusts” and pay nothing at all.
    No wonder 400 families own everything.

  3. theorajones says:

    Insane salaries like these are only possible when you have some kind of rentier activity. Yes, I’m sure these boys are being terribly clever at their jobs and I’m sure they’re contributing to our economy. But they’re not contributing so much to justify this kind of return. It is only possible to earn this kind of money when you have some kind of systemic barriers to competition and a capital market structure that is characterized by clannish insiderism as opposed to free and open market practices.

    What I’m saying is that when you have money like this for people who are allocating capital well, you will, by definition, have outlandish salaries for people who totally failed. Because absolutely insane paydays like this indicate you’re operating in a capital market system that is more focused on rewarding the people who move capital than the people who own it.

    That is, when a single person can earn 4 BILLION dollars in a year, it is clear evidence that too many investment activities are more about skimming than they are about returns.

    Pay like this is a canary in a coal mine.

  4. chicagosean says:

    “The majority of this comp is based on performance fees, plus investment returns on their own money.”

    I think it should be noted that these men weren’t PAID this amount of money. The majority (or at least a significant sum) of these totals came from returns on their own money invested in their funds.

    Just sayin…..

    ~~~

    BR: True — its a paper gain that they compound by leaving the capital it in their own funds . . .

  5. RandyClayton says:

    To jjay — Mr. Tepper can pay only the long term capital gains rate (15%) on those $4 billion in earnings due to a big hole in the tax code. Pretty nice, eh?

  6. Mannwich says:

    The asset strip mining of the U.S. continues unabated. What real value do these sharks add? At least guys like Jobs offer an actual tangible product?

  7. cognos says:

    The real farce is the low capital gains (15%) loop hole… that needs to be 20% immediately. A real trajedgy. And its even lower than 15% effective… because its deferred.

    I am all for making money, and I bet my old boss (great guy) is on the list in 15-25. But taxes need to be flat… close the loop holes, the big deductions, equalize capital / income taxes, make FICA 3% on all income, and I even dont like the medical and charitable deductions (remember these skew mainly to the super-wealthy).

    Everyone should pay there fair 25-33% share above say $50k… (even if they give it to charity!). That’s a good basic social bargain.

  8. Mannwich says:

    @cognos: I’d go even further. Scrap the entire tax code and start over. Will never happen though. Far too many jobs in this country depend on the increasing complexity of things like our tax code.

  9. Pat Shuff says:

    All this reminds me of an old saying by the renowned short seller Jim Chanos of Kynikos Associates Ltd. “Short sellers are the financial markets’ real-time detectives, while financial regulators all too often end up as market archaeologists,” Chanos likes to say.

    http://www.bloomberg.com/apps/news?pid=20601039&sid=a6dpE_UaA1gg

    As in Soros & friends takedown of the BoE ’92, currency raiders and hedgies are just interested
    in debating honest money and authentic valuations. It’s a dirty job but someone’s got to do it.
    Like Markopolos says, to improve the cop on the beat you got to hire the best at the SEC, pay them
    top dollar and give them a cut of the recovery.

  10. Mannwich says:

    Exactly Pat. I’m SURE these guys are all so altruistic. They’re just looking out for society and their country? What a farce.

  11. WFTA says:

    I would be interested to know: to the extent that the earnings came from investments made with other people’s money, how much is being taxed as long term capital gains.

    I’ll vote for the flat tax when you make it a percentage of net worth, not earned income or consumption.

  12. jjay says:

    If they dump the money into some charitable trust or foundation, they don’t even need to pay the 15% I believe. Then like Soros, they can promote their own personal agenda with essentially taxpayers money. I thought all those trusts had to be distributed and taxed after the third generation. The Ford and Rockefeller Foundations are still ongoing, when do they pay cash out and pay up? Any tax attorneys out there?

  13. alfred e says:

    @cognos: Well, we do agree on something, but not totally.

    Why is it a wage-earning family can quickly find themselves in the 35% tax bracket, and these billionaires pay 15% or less?

    It was not all that long ago the top rate was 70%. But that was never a rate charged to the elites, just a sop for those that confused the tax code and those that knew how to play it.

    Those that enjoy their jobs and can’t/don’t want to hire attorneys and accountants get picked clean. See you in tax court.

    Other than that. These hedge fund people are thieves and looters. It’s a zero-sum game. There’s no REAL contribution. It’s all nothing more than a big casino. And the owners always get their cut.

    What these frogs are doing to commodities prices that come out of every little guys pockets should be deemed immoral, unethical and illegal.

    But not here in the good ole US of A. We set the moral standard for the world.

    RIGHT?

  14. mtlippincott says:

    I work for fund that invests in 3 of these guys, the overwhelming majority of this pay has to be the growth from the reinvested performance fees from years past…it’s not like Tepper’s salary was $4 billion this year. We don’t bitch about Buffet’s huge salary if BRK happens to go up 50% in a calendar year, it’s not that different.

    Now, being able to roll performance fees back into your own fund and thus avoid income tax rates is absurd. Not even Buffett can do that.

    Also, remember, this pay comes from the pockets of his investors, like my fund, not by rentier extraction or something. The only people getting fleeced are people like me who invested with. Here’s a rough estimate to show what might make up Tepper’s $4 billion:

    Assume Tepper has no money in his own funds, and he is the only person at the fund to start. The article states his fund grew 130% in 2009 (that is about right based on the figures I have) but lost 27% in 2008. The article also states the fund currently has about $12 billion in assets. Assuming no inflows/outflows during that time period (huge assumption), you have the following:

    $12 billion end of 2009
    $5.21 billion end of 2008
    $6.63 billion end of 2007

    So, to arrive at 2009, pay you first have to assume the high water mark for most investors is the 2007 value of $6.63 billion. So the fund earned roughly ($12 – $6.63)*20%=$1.07 billion. Plus the 2% AUM fee (using average of end of 08 and 09 values), ($12 + $5.21)/2 * 2% = $.172 billion. That means Tepper’s fund earned $1.25 billion in fees in 2009.

    So, if Tepper had no money and kept all fees to himself he would have earned $1.25 billion, way less than the $4 billion in the article. This means, of course, most of that came from capital gains on his previous wealth. In fact, the more I think about it, he must be the overwhelming majority as it appears his wealth great by about $3+ billion alone, meaning he started with about $2 billion or so himself. And it’s redundant for him to pay performance fees to himself.

    Also, Phil Falcone is still below his high water mark of years past so the overwhelming majority of his pay must be gains on his own investments. That’s just not earnings in the sense we think about it. I hate these articles, I think they mostly misinform.

  15. mtlippincott says:

    Bad math, sorry folks. Make that $7.14 billion at the end of 2007.

    That would make the performance fee $.97 billion and overall fees about $1.14 billion. So it’s even less that I posited.

    Point is, this article might as well be titled: David Tepper, worth about $2 billion, grew his $2 billion in personal wealth via investing to $5+billion.

    That’s a lot different than: David Tepper paid $4 billion.

  16. DeDude says:

    None of them did anything of use to society as a whole. They raped and pillaged other investors who were less sophisticated, and the pensions and hard earned salaries of people who were to busy doing something constructive to defend themselves against these vultures. I say: “off with their heads”.

  17. cognos says:

    You cannot have public financial markets without investors who “price” those markets. Those who “price” these markets very effective will make loads of money.

    This basic function is “supply capital” to good investments and “take capital” from bad investments.

    This is NO DIFFERENT than the venture capitalist… its just a different stage in the lifecycle of companies.

    It is one of THE most important functions in the system and we just need more of it. (Ah, bc its so vital is exactly why its so well compensated. Duh!)

    Are you guys saying — 1) “we shouldnt have a stock market”? Or 2) that “no one should be allowed to invest with” — Soros, Tepper, SAC, me? Or 3) “that no one should be allowed to be successful when you arent?”

    It sounds like the 3rd point is the most true. It sounds like there are alot of people looking for someone to be angry with — besides themselves (for not investing better, not studying hard, not selling their house in 2006, etc).

  18. Mike S says:

    Griffin is probably the worst trader out of the bunch. I wonder how much money that guy has made over the last decade on his own ideas, rather than just running a bunch of successful managers that he fires once they lose a penny.

  19. cognos says:

    Mike S:

    ANSWER – Griffen hasnt made much money at all in the last 10-years. He lost close to $10B in 2008, and while he was up 50% in 2009… he still needs another 33% to be above high-water.

    Considering redemptions and fees. Citadel may be negative in total $ pnl to investors the last 5 years.

    If they have 12 mediocre months or a 10% drawdown… they will fold.

  20. comet52 says:

    PIIGS.

  21. DeDude says:

    You could easily get rid of these leaches without getting rid of public financial markets and the limited service such markets do to society. You could simply do as we do with speculation in the housing markets; if you hold it less than 2 years you get taxed on the profits. With commodities we could get even stricter and tax any sales of futures, if the person did not take possession of the corresponding commodity within a reasonable time. The speculators claim to do a service to society by ensuring quick and efficient “price discovery” yet there is no indication that this “quickness” and “efficiency” does society much good, let alone is worth the absurd amount of money that it drains out of society (companies and other investors). The individual’s “success” is not an issue; the question is whether their “service” to society justify the amount of GDP they are sucking into their own pockets.

  22. Andy T says:

    “I have no problem with anyone making absurd amounts money of who actually earned it through their skill or creativity or business acumen. If you create something (Search engine, iPhone, etc.) or if you are an being outstanding investor or stock picker or trader, so be it.”

    Then you should have no problem with John Arnold on the list. He doesn’t have any more investor money in the “fund.” It’s basically all his money as well as the other traders. The guy is quite simply the greatest Natural gas trader in the world. It’s why the UNG fund longs will never ever make much money.

  23. Andy T says:

    DeDude at 5.09pm

    Is that commentary an April Fool’s joke? You cannot be serious about questioning the role of speculators in commodity markets.

  24. DeDude says:

    Andy, I am very serious. The money that commodity speculators harvest on their activities are coming right out of the pockets of consumers and other people who spend their days doing something useful for society. It may just be a dime per gallon at the gas station but all of us with a real job pay those bastards real money whenever we purchase a product whose price have been inflated by speculators. I still say “off with their heads” or at least tax the sh!t out of them ;-)

  25. mathman says:

    Driving home today i saw two Amish kids, maybe late teens, radiant smiles on their faces, clip-clopping along in their black wooden carriage pulled effortlessly by a beautiful dark brown muscular horse, work clothes rumpled and spattered, headin’ for some farm up the road.

    http://gallery.photo.net/photo/4594241-lg.jpg

  26. philipat says:

    Why no built-in webcam? My Skype video calls with family and friends around the world mean that a laptop is still essential. Not a game changer to me.

  27. philipat says:

    Absolutely agree Barry. What people do with their own capital, and that of “Like-minded” individuals is entirely their own business. Whether they make or lose Billions is entirely at their discretion and is the way free markets are supposed to work. It is when Public Companies start taking similar risks with Pension Fund money and other OPM in general without adequate disclosure that problems arise.

    I still feel that, beyond the re-installation of Glass Stiegel, Investment Banks should operate as LLP’s not as Public Companies.

  28. Andy T says:

    DeDude

    It’s very difficult to take anything you write seriously with comments like that at 5.34 pm

    What should we do? Just set a price for oil? Cap it at $50/bbl and call it good? Where should the floor be? $20/bbl? Who would decides such things absent speculators and hedgers in the marketplace setting the market clearing price?

    Your ignorance is mind-numbing….

  29. alfred e says:

    @Andy T: Agree with DeDude.

    The old rule used to be only producers and manufacturers could play commodities. Even then it was something of a rigged game.

    If there were not a natural bias toward higher commodity prices today, speculators might be OK.

    But that is not the case.

    Just look at the oil run-up. That was pure greed. Too many players with no intention of taking delivery of a single drop of oil.

    Capitalism requires regulation and a moral sense that transcends pure profit motives.

  30. El Viejo says:

    Hmmm! Let’s see:
    1. Long Term Capital Mgmnt was having an effect on the worldwide markets.
    2. So after they failed minimal, if any, regulation resulted.
    3. At least 50 hedge funds cropped up in LTCM’s place.
    4. The Dot.Coms made us forget about LTCM. Damn the torpedoes full speed ahead.
    5. 401k’s were almost imperceptibly injecting a large amount capital at a regular clip.
    6. Naturally, rates are gonna go down.
    7. Banks are squeezed and forced to become volume dealers on big ticket items. Blue Light specials on condos!
    8. Greed begets leveraging and politicians grease the wheels with tax cuts for the rich saying that the
    rich create jobs, but the rich just walked down the street to their local hedge fund. Employees are a pain.
    9. Round and round we go till someone big screwed up and leveraged just a little too much.
    10. When you are having too much fun and set the houseboat on fire, well there is just no place for the rats to run. It’s a closed system.
    11. So now, rather than be a party pooper, we resist regulation still and say, “maybe bubbles are good”.
    Free Market Capitalism Forever!

    Peter G. Peterson 10 years ago, in the book Gray Dawn, said that the demographics big monkey should start arriving this coming decade. He mentioned early arrivers: Japan, Spain and Italy. (Mexicans may save us) With the blue hairs (like me) demanding their expensive medication and out-voting our children what will the next reces… er business cycle be like? A perfect storm perhaps. The last perfect storm in `29 begat WW II. At least I’ll be too old for the draft.

  31. gbgasser says:

    I saw a stat where over 98% of financial market business is purely speculative gambling. Casino activity that is not putting capital to use generating wealth and creating job opportunities. This is not what the financial markets were originally designed for. They were a way to link the savers with the creators and generate new potential growth businesses. The gambling should not be rewarded as much as it is. If its not creating new business opportunities, tax the shit out of it. Its wasted capital. Too many people are homeless and starving to have billions being bet on whether or not Greece is going to be able to make a bond payment.

    I have no problem with someone getting rich but when their incentive to get rich requires them to be pulling for someone else to experience misery so they can profit off it something has gone badly off the tracks.

    ~~~

    BR: That is wildly incorrect — do you have a source? Otherwise, I am throwing a yellow flag, and calling bullshit.

  32. DeDude says:

    Andy; I never suggested we should cap the price, just chop the cap off those who manipulate the price. Those people are stealing from the consumer who ends up paying higher prices at the pump than they would otherwise have done. This kind of subversive act undermining society and stealing other peoples money should not be allowed just because the thugs doing it are calling it “free market forces and capitalism”. We could also start calling bank robbery “free market forces and capitalism”, it should still be illegal and punished as such. If it hurts society more than it helps society it should be curtailed, so a ban (or tax) on commodity speculation is a no brainer. Then without the manipulation from the speculators, the market will find and set a price for oil determined by supply and demand.

  33. DeDude says:

    gbgasser; the 98% is probably hyped over the top. But with CDS estimated at 60 Trillion and the worlds GDP being about the same, I would believe a statement that the majority of financial market business is purely speculative gambling. We need to stop money and human resources from being wasted on things that benefit certain individuals with outright harm to other individuals or society as a whole. We do so with all other human activities, why not with financial activities.

  34. DeDude says:

    And just as we finish this debate a hearing expose how JP Morgan and Goldman Sachs are manipulating gold and silver markets wit huge short positions. Media interviews with the person exposing this are arranged – and immediately cancelled, after those to Wall Street thugs make a few phone calls. Make no mistakes about who is running the world.

  35. DeDude says:

    Should have given a link for that last piece: http://www.fourwinds10.com/siterun_data/business/currency/news.php?q=1268333738 The actual hearing conveniently suffered a camera “malfunction” so I cannot give a link to that.

  36. Thor says:

    Hah, sounds like someone used to work for Enron.

  37. ancientone says:

    We live in a new Dark Age of economic dislocation, where the “rules” favor the well-off. It is very similar to the period from the Civil War until the New Deal. We then had fifty years of moral sunshine, where the economy actually “lifted all boats”. With the triumph of Reaganomics, however, we returned to a set of rules that again favor the rich—-and there’s no end in sight. God help the American worker.

  38. gbgasser says:

    BR and DeDude

    I extrapolated my number from some information here http://bilbo.economicoutlook.net/blog/?p=9006

    Investment in economist speak is about increasing the flow of goods and services and creating jobs. Most of what people think of as investment is nothing more than casino activity. Placing bets on which direction the price of an already existing asset will go. If it aint creating a new asset its not investment.

    The linked article talks about (and links to sources) how much of daily activity is high frequency trading, holding an asset for less than a minute even less than a second at times. This is not “investment” its pure gambling and serves no social purpose and can greatly undermine productive ventures by destabilzing forex and debt markets.

    When you see the volume of foreign exchange transactions is almost 70 times higher than world trade of goods and services.

    In Germany, the UK and the US, the volume of stock trading is almost 100 times bigger than business investment, and the trading volume of interest rate securities is even several 100 times greater than overall investment.

    The vast majority of cross-border financial transactions do not support trade in real goods and services.

    98% may be a little high but not much.

    ~~~

    BR: That’s a FAIL.

    Taking an opinion from a 3rd party blog, and then extrapolating on top of that is not how we do data analysis around here.

    Go to the the data source, then do whatever work you want on it, explaining where its either wrong or misleading.

  39. alfred e says:

    @theorajones: I agree totally. My point exactly.

    @ancientone: Also agree even more.

    And yet, we, with some years and experience and understanding, get to observe our government play Nero and fiddle while Rome burns.

    @BR: You have no issue with people making ridiculous sums if they ……. . That’s totally lame. Socially and morally irresponsible. Oh, you want your shot to become a $B, or are you choosing your enemies carefully?

    How exactly is one able to earn $4B in a single year. Notice the question earn.

    Am reminded of an old Hebrew saying (correct me if I mangle it) ” every good businessman has a little ganalf (thief) in him”. I’d say we’re way past that point.

    The mythological BS boggles the mind.

    There are only two reasons these people are able to earn these sums. And neither of them has to do with ability or effort.

    I am increasingly reminded of the Eddie Murphy movie “Trading Places” . Why weren’t we alert enough or concerned enough to realize it was not fictional, and act on it then? Could have saved the taxpayers about $6T.

  40. gbgasser says:

    BR

    That is not just “some 3rd party blog”. If you have criticisms of Mr Mitchells work, say it. I’ll put his work up against anyones.
    Again, when the volume of trading activity in a market (forex)is 70x higher than the amount of goods and services exchanged and in stocks it is 100x higher than business investment, it is not hard to conclude that the vast majority of activity in markets is pure gambling on EXISTING assets in secondary markets and not going towards primary investment.

    Why dont you direct me Barry to a site where the numbers support YOUR position. I want to be educated.

    In fact tell me first what is your position? How much of daily/weekly/annual market activity is actual investment versus gambling?

    One could argue of course that the gambling provides jobs, certainly many “investment” firms have hired plenty of people over the last few decades, but are they PRODUCTIVE jobs. In the same way that people tend to ask about govt jobs being productive.

  41. gbgasser says:

    Wow heres something interesting

    http://robertreich.org/post/491676652/the-paper-entrepreneurs-are-winning-over-the-product

    Funny how things work. Reich has an article on exactly what I’ve been thinking and talking about here. His numbers that only on third of investment was towards productive not casino activity was in 1980!!

    Do you think its gotten better or worse since 1980?? Since the commodities markets were Phil Grammed in the 90′s and the whole business world became ENRON- ED do you think the ratios of productive to casino activity have become better ?

    I think my 98%(admittedly my guess) is closer than most people want to think. There is a $hitload of CDS bets still floating around out there and they arent doing anything productive. They are merely destabilizing and freezing a lot of potential capital markets.

  42. don-bo says:

    You have got to be kidding me! These guys are the ‘real hero’s’ of capital-ism…who do you think invests their own money into start-ups, new products, drugs, innovation and provide very deep pockets to see ideas come to market–the boys on your list above, thats who. My stars, now you snibblers want to screw it all up by adding government beauracy to the mix. My God…who’s side are you on anyway? All right now, tell me truth, who amognst us couldn’t use a few extra million dollars a year working for the boys above? Huhh, sure you do!

  43. Ms. Sunshine says:

    What I want to know, yeah the numbers aren’t exactly right. There’s plenty there for comfort purposes.
    Are any of these guys available bachelors? :-)