Hedge Fund Rock Stars
The days when everyone wanted to be a sportsman for the money and fame are coming to an end. I write for a few blogs as well as HF Markets and the top viewed article that we have written was a brief piece on ‘How to become a hedge fund manager’. It is a cycle that mirrors that of the 80’s when I was a teenager. Having given up on the idea of being a professional footballer or BMX rider, my father said, while reading the newspaper one day, “This is what you will be… a Yuppie.”
After investigating what it meant I decided that a Yuppie was a stockbroker riding around in a Ferrari. My path was forever set.
Today the Yuppie has been replaced by the hedge fund manager. They are called everything from ‘hedgies’ to fat cats and, if some politicians are to be believed, the downfall of the free market.
The thing is that you can see why a young college student might do a search and end up at my humble article because these guys are seriously minted.
Trader Magazine (www.traderdaily.com) is an excellent site (and free magazine if you are in the biz) and they put together a list of the most successful. I have taken the numbers for this article from their survey and it is mind blowing reading.
In 2007 you would have needed to be earning at least $75mn to get on the list of top traders, this years’ elite just blow that away.
Trader Magazine makes this caveat:
“Along the way, we’ve published a few estimates that wound up being too high; others, more often, came in too low. But we continue to strive for the most reasonably accurate compensation ranges that vigorous reporting can produce. But enough about our hard work; it’s time for mambo number five. The trades have been cast, the calculations made. On with our countdown. And for the third straight year, we’ve got a new top dog.”
Phil Falcone
Firm: Harbinger Capital Partners
Age: 45
Estimated Income: $1.5–$2 billion
Phil Falcone, an unassuming former Harvard hockey player, Kidder Peabody junk-bond trader and Barclays Capital executive, made the top 100 with $40 - $50mn and upped his game to end up on last years list at $100 - $150mn.
He came onto the list this year with a vengeance with TM estimating that his Harbinger Capital Partners Offshore Fund was up 114%. With $20bn under management he is estimated to have taken $1bn - $1.5bn.
This really makes you want to hate him but a friend says “Phil is the most down-to-earth guy you’ll ever meet, he doesn’t care about money. I mean, he cares, but not like some guys.”
Bless him…
Jim Simons
Firm: Renaissance Technologies Corp.
Age: 69
Estimated Income: $1.5–$2 billion
A former Defense Department code breaker and Stony Brook University math professor credited with helping devise an influential geometry theorem, Simmons has used the vast fortune he has made since leaving academia in the late 1970s to support, among other things, math teachers, the study of autism and health care in Nepal. At the end of February, he gave Stony Brook $60 million.
Renaissance’s $7 billion flagship fund, Medallion, rolled out a 70 percent return in 2007. Interestingly the firms own employees are in the fund which charges outside investors a 5 + 40 fee. Employees get a family discount at 5 + 36… nice.
Steve Cohen
Firm: SAC Capital Advisors
Age: 51
Estimated Income: $1–$1.5 billion
It is said that half of the money under the SAC umbrella is Cohen’s own money. A testament to his confidence in the fund. There is a sizeable cash mountain of $16bn in the funds which are charged at 3 + 30. He puts seed funds up for traders who cram his offices in his offices and was rumoured to be selling a stake in his business last summer but nothing has happened yet. No doubt there will plenty of takers if he does choose to sell.
Ken Griffin
Firm: Citadel Investment Group
Age: 39
Estimated Income: $1–$1.5 billion
The Citadel Chief was left off the traders list as the impression was that he as not so much involved in the day to day trading as well as the fact that the funds are overseen by a large staff of quants. However several sources say this is not so.
“Ken is judge, jury and executioner over there,” one veteran hedge-fund statesman explains. In other words, he keeps a hand very much in the investment process, interacting closely with his managing directors on every strategy. Much of Citadel’s trading is fundamentally driven, too.
Plus, Griffin now owns a rich collection of trading baubles, among them BofA’s prime brokerage unit; the remnants of the Sowood experiment; and a sizable piece of E-Trade, snatched up in a contrarian’s stroke of retail bottom-feeding.
Citadel has some $20 billion in hedge-fund assets, and the firm enjoyed aggregate firm wide returns of 32 percent. In lieu of a standard management fee, Citadel passes on fund expenditures to investors, then keeps 20 percent of the performance spoils.
The above profiles show that we are in a changing world where huge sums of money are being earned by speculation on a grand scale. It is no wonder that students look to the hedge fund managers as the new rock stars. Leaving university with a first from a prestigious school will get you on the first rung of the ladder but these guys have to have more than just smarts to reach these trading heights.
Still, next year there will be another list and, no doubt, new faces will appear with billion dollar pay checks. I have a nephew who just left Cambridge with a First. My advice, as his only uncle, was that he should get himself in a hedge fund and work his way up for the next few years, then his future would be set.
With a shrug he said “I don’t think so, I am going to college to be a Professor. As he enters university beginning his Master and then PhD to spend a life in brown suites and rubbish cars, I can’t help thinking that he has wasted an opportunity of a lifetime. He say “It’s not all about the money is it Uncle?”
I guess the kid is a lot smarter than I was at that age….
