U.S. News

Top Hedge Fund Managers Salaries Ballooned in 2006


The high-rolling life of the world's top hedge fund managers just keeps getting better.

The latest survey on hedge fund salaries shows that, for the first time, founding executives at three major hedge funds took home well over $1 billion last year. And the average pay for the top 25 hedge fund managers rose a staggering 57% to $570 million in 2006 from 2005, according to industry publication Alpha Magazine.

The magazine, which based its pay scale findings on fund performance, fees and ownership structure, said fund managers benefited from rising global equity markets, adroit investment strategies and fees paid from investors to manage their money.

The Alpha survey also showed that experience pays - among the top-10 earners are veteran traders including George Soros of Soros Fund Management, Bruce Kovner of Caxton Associates, Paul Tudor Jones II of Tudor Investment and Carl Icahn, the 1980s corporate raider-turned-hedge fund operator.

Topping the Alpha list for 2006 for the second consecutive year is James Simons, the 69-year-old founder of Renaissance Technologies, whose pay packet swelled by $200 million to $1.7 billion in 2006 from $1.5 billion in 2005.

Simons, whose Long Island, New York-based fund family generates profits through computer generated trading models designed to track minute changes in global securities markets, holds advanced mathematics degrees and maintains close ties to academia.

The second-highest 2006 earner, according to Alpha, is Ken Griffin, the 38-year-old founder of Chicago-based colossus Citadel Investment Group, a $12 billion fund group that trades in myriad strategies including energy, long-short equity, quantitative strategies and credit.

Griffin took home $1.4 billion in 2006, up from just $240 million in 2004, fueled by gains to its Kensington fund, which posted average annual returns of 20.7% over eight years and its Wellington fund, which gained an average of 23.6% in the same period.

Citadel also gained through its two-year-old electronic trading platform, which trades an average of 150 million shares daily, Alpha said.

Ranked third is Edward Lampert, head of ESL Investments, who is chairman of Sears Holdings and holds a 42.5% stake in the mega-retailer that he helped form by merging Sears into bankrupt Kmart Holdings in 2005.

The stock continues to scale upwards, rising 43.6% in the 12 months of 2006 and now trades at $189 a share, fueling gains for ESL as its biggest holding.

The following is the complete top-10 list of hedge fund earners in 2006:

    1. James Simons, Renaissance Technologies, $1.7 billion

    2. Ken Griffin, Citadel Investment, $1.4 billion

    3. Edward Lampert, ESL Investment, $1.3 billion

    4. George Soros, Soros Fund Management, $950 million

    5. Steven Cohen, SAC Capital, $900 million

    6. Bruce Kovner, Caxton Associates, $715 million

    7. Paul Tudor Jones, Tudor Investment, $690 million

    8. Tim Barakett, Atticus Capital, $675 million

    9. David Tepper, Appaloosa Management, $670 million

    10. Carl Icahn, Icahn Partners, $600 million.