Top 5 US hedge fund managers earned $1.5b each

Industry's top 100 earners took home average of $365m last year: Survey


NEW YORK - THE wealthiest United States hedge fund managers and traders became a lot richer last year when five of them took home US$1 billion (S$1.51 billion) or more each.

Mr John Arnold, a newcomer to the exclusive club of top industry earners, banked an estimated US$1.5 billion to US$2 billion in 2006 for having coolly and correctly called the direction of natural gas prices, according to a study compiled by magazine Trader Monthly and released on Monday.

Mr Arnold, a 33-year-old former Enron trader, delivered an eye-popping 317 per cent before fees to investors in his hedge fund Centaurus, by taking the other side of a bet that felled Amaranth Advisors last September, the magazine said.

His returns helped him muscle past mathematician- turned-investor James Simons of Renaissance Technologies, ESL's Mr Edward Lampert, veteran oil trader Boone Pickens and SAC Capital Advisors' Mr Steve Cohen, who each made at least US$1 billion.

Mr Simons, Mr Lampert and Mr Pickens have ranked among the top three earners since magazines such as Alpha and others started tracking their pay cheques.

The 100 best-paid managers earned an average US$241 million (S$364.5 million) each, Trader Monthly reported. This is more than double the US$110 million the 25 best-paid managers earned in 2002, according to a different survey.

Hedge funds are loosely regulated investment pools where assets have more than doubled to US$2 trillion in the last three years as wealthy individuals are joined by pension funds and endowments as investors.

The best-paid hedge fund managers delivered returns of 30 per cent to 40 per cent last year, but the average hedge fund's returns were decidedly more meagre at roughly 13 per cent, according to performance tracker Hedge Fund Research.

Last year, hedge funds returned only slightly more than the average US stock mutual fund which gained 12.4 per cent, but costs a lot less, according to data from Lipper.

Mr Simons' fund, for example, is among the most expensive in the industry, charging a 5 per cent management fee and a 44 per cent performance fee.

Mr Arnold's fund charged a 3 per cent management fee on top of a 30 per cent incentive fee, the magazine reported.

The list of top earners also included:

Mr Robert Soros, who has taken over for his father George;

Mr Stanley Druckenmiller, who helped Mr Soros earn billions;

Mr Jim Chanos, who was among the first to spot trouble at Enron; and

Mr William Ackman, who has successfully pushed for corporate change at firms such as Wendy's International and McDonald's.

REUTERS