Are Hedge Fund Salaries Worth It? Sometimes
Hedge funds can make their managers gigantic fees -- and sometimes leave investors holding the bag. But as CNBC's Trish Regan reported on "Street Signs," outraged calls for trader and CEO salary caps may be missing the whole story.
Regan pointed to Trader Monthly's annual report, which listed the $250 million earned by Pequot Capital's Art Samberg in 2006 -- when the fund returned only 8%. Another questionable package: Louis Bacon pulled in $400 million, and his Moore Capital returned 5%.
The Heritage Foundation's Rey Hederman said, "If these wild compensations are no longer seen as a good deal, we'll see a change in the industry." But he warned that salary caps can end up driving away the most qualified trading and executive talent.
And Regan pointed out that at the very top of the compensation scale, the funds rewarded investors lavishly. Legendary takeover king Boone Pickens earned an estimated $1 billion to $1.5 billion in 2006, and his BP Capital returned 98%. The biggest winner -- for himself and for investors -- was John Arnold: He raked in $1.5 billion to $2 billion, and his firm, Centaurus Energy, returned a rich 317%.