Highest Paid Hedge Fund Manager Earns Over $1 Billion

by Phillip Morton, Investors Offshore.com

30 May 2005

The shaky performance of many hedge funds in recent months does not appear to have dented the earnings of the most successful hedge fund managers, according to Alpha magazine's 2005 'rich list' of the top 25 best paid managers.

This year, the accolade for the highest paid hedge fund manager goes to Edward Lampert of ESL Investments, who earned $1.02 billion. Last year, Lampert, who predominantly invests in value stocks, saw the value of his overall portfolio rise by 69% before his 1% management fee and 20% performance fee, helped by a tripling in value of a significant holding in the retailer Kmart.

Number two on the list was James Simons of Renaissance Technologies Corp who raked in $670 million. Last year his Medallion fund posted a return of 24.9% after his 5% management fee and somewhat steep 44% performance fee. Regulatory filings show that Renaissance had a $9.6 billion equity portfolio spread over 1,654 issues at the end of 2004, up from $8.5 billion at the end of the previous quarter but well down from $15 billion at the end of the third quarter of 2003.

Third on the list was Bruce Kovner who earned $550 million running the offshore fund Caxton Global Investments. While last year's return was a relatively muted 9.93%, the fund has enjoyed annualised returns of 30% over the last 22 years.

Making up the rest of the top five was Steve Cohen of SAC Capital Advisors who earned $450 million and David Tepper of Appaloosa Management who earned $420 million. Other notable names in the top ten include George Soros and Paul Tudor Jones II, who were sixth and seventh respectively.

The average income from fees and performance for members of the top 25 club was $251 million, and hedge fund managers needed a minimum income of $100 million to make it onto the list.

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