Top Hedge Fund Manager Pay Tumbles To Lowest Since 2005

Tyler Durden's picture

Last week news emerged that as a result of the deteriorating local economy, coupled with a plunge in hedge fund profits, the capital of Connecticut - Hartford - was preparing for bankruptcy. Among the reasons cited by Department of Revenue Services Commissioner Kevin Sullivan was that wealthy people are dramatically less wealthy than they were before.”

It turns out that, at least relatively speaking, he was correct.

According to the latest annual ranking by Institutional Investor's Alpha magazine, the woes that have plagued hedge fund LPs who have paid 2 and 20 (or 1 and 10 as the case may ) for seven consecutive years of market underperformance have finally spread to management and in 2016 the 25 top paid hedge fund managers made a combined $11 billion. Although that sounds like a lot, it's actually the lowest total since 2005, when the top 25 earned just $9.4 billion. It's also just a little over half of what the top 25 managers earned just three years ago, when they reaped a total of $21.2 billion.

The average top earner made $440 million in 2016. The median earner made $250 million, the lowest since 2011, when the median earner made $235 million.

Surprisingly, even in 2008, when the stock market and many hedge funds were down by large-double-digit percentages, the highest earners made more money as a group: $11.6 billion.

To qualify for the top 25 this year, managers needed to earn "only" $130 million, the lowest floor since 2011, when a manager required $100 million to make the list. Last year's comparatively lower numbers underscore the  dichotomy of the hedge fund industry in 2016.

And while data scorekeepers like HFR talked up the fact that the average hedge fund had its best year since 2013, that does not accurately portray what really happened on a fund-by-fund level. Rather, there has been a group of managers that enjoyed strong double-digit gains last year. However, looking beyond this top-performing group reveals that a significant proportion of the largest hedge fund firms - those whose principals are more likely to make the most money - either suffered small losses or eked out low-single-digit gains.

As has been the case in recent years, in 2016 compensation was led by the quants who have been least impacted by the death of fundamental analysis in a centrally-planned market. 

RenTec's James Simons topped the table for the second year in a row, earnings $1.6 billion, down only $100 million from the previous year, after his two main funds posted double digit returns. In second place was Bridgewater's Ray Dalio, which manages around $160bn in assets for 350 institutional clients, with earnings of $1.4 billion.  As the FT notes, the popularity of the computer-driven funds helped the quants rack up their eighth consecutive year of inflows in 2016, doubling their assets since 2009 to $918 billion, according to Hedge Fund Research.

After the top two earners, the ranking amounts drop considerably: two more quants filled out the third and ourth spot: Two Sigma founders John Overdeck and David Siegel, who each made $750 million. Last year their Compass Fund rose by double digits. Continuing a trend from the previous year, quantitatively focused firms, so called because they mostly or totally rely on computers to make their investment decisions, were among the big winners in 2016. The four highest earners on this year's ranking hail from quant firms.

A total of13 managers from last year's "Rich List" are among the top 25 earners this year; with several of qualifying even though they posted their worst results in several years. They include Kenneth Griffin of Citadel, the top earner in last year's ranking, who slipped to 6th place after his total earnings fell by about 65%. In 2016, Citadel's main multistrategy funds, Wellington and Kensington, rose a little more than 5 percent, their smallest gain in eight years.

Notably, some of the best-known names in the industry, including Bill Ackman, John Paulson and Eddie Lampert failed to make the list.

Among those missing in the Top 25 this year but qualified for last year's top ranking, four are from firms headed by so-called
Tiger Cubs that lost money on their long-short funds in 2016.
They include Chase Coleman of Tiger Global Management, Andreas Halvorsen and Daniel Sundheim of Viking Global Investors, and Stephen Mandel Jr., of Lone Pine Capital. As a result, this
is the first time since 2010 that no one with ties to Julian Roberton's Tiger Management qualified for
the top 25 ranking. 

Just to put these earnings in context, even the lowest-ranking manager on Alpha magazine’s expanded top-50 list made more money in 2016 than any big United States bank executive, including Jamie Dimon of J. P. Morgan, Lloyd Blankfein of Goldman Sachs and James Gorman of Morgan Stanley, all of who have been criticized for their big paychecks.

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PleasedToMeatYou's picture

"Top Hedge Fund Manager Pay Tumbles To Lowest Since 2005"

Oh, the humanity!  This is awful.  Let's take up a collection.  Pass the chamber pot. 

Au_Ag_CuPbCu's picture

Seriously, ONLY $11 billion between 25 of them...

small axe's picture

these parasites should be taken out to an empty field and made to dig their own graves.

aloha_snakbar's picture

Poor babies...they should just be content(for now) that we have not stormed their office buildings, given them Colombian neck ties, and then hurled them off of the roofs...

Bam_Man's picture

Their pay should be ZERO, since the vast majority of them cannot even match the peformance of an index fund.

Worthless, opportunistic parasites.

alfredhorg's picture

I've been beating all index funds since 2006:

Does anyone want to pay me something above zero?  I don't need much.  Right now, I drive a school bus for $20 per hour:

IENTJ's picture

They are paid the ancient blood oath of Timbulus ... They serve their demon masters.

espirit's picture


Since I couldn’t get the full 25, I’ll be glad to add these 10 to my favorites list.


sister tika's picture

The casino-hedge carcass has been picked clean. Very few profit markets remain except for war.

JoeTurner's picture

it's like the Gambinos but with nicer suits...

Rainman's picture

I dont' know... that's enough fiat to make me lie, cheat and frontrun like a muthafuka too... if I could stay out of jail.

Son of Captain Nemo's picture

"WHY" isn't there a "nail" from a "nail gun" piercing the center(s) of their skulls... swingin from a rope in their $15 million hand crafted cedar closet... Or "exploded" at the base of the high rise they work or 'live in'?....

Asking "WHY" considering all of the damage they've each done and more importantly HAVE BEEN ALLOWED TO DO unfettered that GOT US TO THIS PLACE!!!

peopledontwanttruth's picture

They're getting their reward in full now.

Son of Captain Nemo's picture

To a certain extent pdw you are correct in that they will lose their fortunes (due to the very long leash they've been given and their own poor choices) which will obviously depress them to the point of "suicide"!...


I like lynch mobs better as their is nothing more encouraging towards needed change when a whole lot of investors get very "pissed off" at their losses due to these "suicidal money managers" that made them poor and have the need for "RELEASE"!!!

In Gerald Celente's great common wisdom "When people lose everything"... "THEY LOSE IT"!

Son of Captain Nemo's picture

Wake me up when the "lynch mobs" finally show up for that much needed "release"!

lester1's picture

What does the head manager for the federal reserve's plunge Protection Team make a year?

brooklinite8's picture

I thought so. I started seeing this guy on the sidewalk before I enter my office. I guess it was David Tepper. Can't survive without wage increase man. Have a nice day folks..

globalintelhub's picture

It is possible to break away from the chains of your timeshare contract

Incorporated by inference's picture

Funny I was just thinking about that, this morning. I'm gonna take the bait. I hope it redirects me to a porn site. Please, please no virus.

aliens is here's picture

I feel so sad for them I guess someone will have to forgo a new jet or a yacht.