Top managers' pay dropped 48% last year

Date: Thursday, March 26, 2009

SAN FRANCISCO (MarketWatch) -- Top hedge fund managers earned 48% less on average last year, but industry chiefs James Simons, John Paulson, John Arnold and George Soros still took home more than $1 billion each, Alpha Magazine said Tuesday.
Simons, who runs quantitative trading giant Renaissance Technologies, made $2.5 billion in 2008, while Paulson of Paulson & Co., best known for betting against mortgage securities, earned $2 billion, Alpha estimated. (See table below.)
Arnold, who runs the top energy trading hedge fund firm, Centaurus Energy, collected $1.5 billion, while Soros, head of Soros Fund Management, made $1.1 billion, Alpha reported.
Top 25 top-performing managers made $464 million each on average last year. That's down from a record $892 million apiece in 2007, before the credit crisis triggered big losses and redemptions across the $1.5 trillion industry. Alpha Magazine cut its list of top earners to 25 from 50 last year.
"The fact remains that $464 million is a kingly sum, especially during a year of global recession, stock market wipeouts and vanishing wealth," Alpha said.


Still, many big hedge funds had big losses in 2008 and top managers suffered along with their investors.
Falcone, Griffin, Steven Cohen of SAC Capital Advisors, Timothy Barakett of Atticus Capital, Lone Pine's Stephen Mandel, John Griffin, head of Blue Ridge Capital and O. Andreas Halvorsen of Viking Global Investors, were among the top 10 hedge fund earners from 2007, but they dropped off Alpha's 2008 list.
Citadel's Griffin personally lost $2 billion after the firm's main hedge funds lost more than 50% last year, Alpha said.
Simons, the 70 year-old PhD math whiz who heads Renaissance Technologies, didn't just avoid that pain last year -- he thrived.
Simons' $7 billion Medallion fund, which uses computer programs to direct a rapid-trading strategy, returned 80% in 2008, Alpha said. Excluding high 5% annual management fees and 44% performance fees, the fund surged 160%, the magazine added.
The Medallion fund returned a lot of money to outside investors in 2002, so Simons and his partners, employees, former staff and friends are the only remaining investors.

Other institutional investors can put money in two different funds offered by the firm: the Renaissance Institutional Equities Fund and the Renaissance Institutional Futures Fund. However, these funds lost money last year, Alpha noted.

Betting against financials.

Paulson, 53, became famous after personally making $3.7 billion in 2007 as some of his hedge funds returned more than 300% by betting against complex mortgage-related vehicles known as collateralized debt obligations.
In 2008, he switched to betting against financial-services companies by shorting their shares and buying protection in the credit default swap market. The firm's biggest fund, the Paulson Advantage Plus fund, returned 37.6% last year, after fees, Alpha said.
Arnold, a 34 year-old former Enron trader, generated returns of 80% last year for his Centaurus Energy hedge fund, mainly from bets in the natural gas market, Alpha reported.
The firm also invests in storage facilities, power plants and is developing natural gas storage caverns with private-equity firm Carlyle Group and the NGS Energy Fund, the magazine noted.
Arnold started Centaurus with $8 million in 2002. The firm now oversees roughly $5 billion.
Interest rate bet
Soros' $21 billion Quantum Endowment Fund gained 8% in 2008, but investments in Indian and Chinese stocks hurt performance, Alpha said.
However, a bet on falling short-term U.K. interest rates by the firm's new Chief Investment Officer, former BlackRock co-founder Keith Anderson, paid off.

Top Hedge Fund Earners in 2008

ManagerHedge fund firmEstimated 2008 earnings
James Simons Renaissance Technologies Corp. $2.5 billion
John Paulson Paulson & Co.$2 billion
John Arnold Centaurus Energy$1.5 billion
George Soros Soros Fund Management$1.1 billion
Raymond Dalio Bridgewater Associates $780 million
Bruce Kovner Caxton Associates$640 million
David Shaw D.E. Shaw & Co. $275 million
Stanley Druckenmiller Duquesne Capital Management $260 million
David Harding Winton Capital Management $250 million
Alan Howard Brevan Howard Asset Management $250 million
John Taylor Jr. FX Concepts$250 million

Source: Alpha Magazine