Is a Hedge Fund Manager Salary a Dream Come True? Yes, yes, it is. I can’t put it in any better words than these, so I’m just going to bring it you straight.
Yes, a hedge fund manager salary is a dream come true. If you can make it all the way to the top, that is.
Do you want to know why? Let me tell you a story.
It’s about Ken Griffin, the highest paid hedge fund manager in the world.
And since I want to show you what a fund manager salary truly is, allow me to tell you a few things about his personal story.
He started off from his dorm back at Harvard, and he made it all the way up to the top.
Now he is the founder and CEO of Citadel, the biggest alternative investment management firm in the world as of March 2015.
Ken Griffin’s net worth is an estimated $7.3 billion in February this year and growing.
Needless to say, he made it all from his work as a hedge fund manager.
Last year, in 2015, his salary was $1.7 billion.
If I were to break that down for you and do that math, it would look like this.
He earned approximately $141 million every month for a whole year. How about per hour? He made a little over $194, 000 every hour.
As far as a hedge fund compensation goes, it’s not that bad, is it? Now let’s put things into perspective.
Billionaire Ken Griffin bought Jackson Pollock’s Number 17A last year for a reported $200 million.
It was the single largest individual art transaction in history.
He also bought a Kooning oil painting from 1955 entitled Interchange for the astounding sum of $300 million.
The combined deal was the largest ever. In fact, it surpassed the last highest one, when the Qatar Museums bought Gauguin'sWhen Will You Marry Me? For $300 million.
Ken Griffin’s purchase of these two paintings gives me the measure of what a hedge fund manager salary can mean, from a personal point of view.
As far as the year of 2015 is concerned, the top two earners in the field of hedge fund managing are the art-loving Kenneth Griffin and genius James Simons.
Together, they made approximately $3.4 billion. The top 25 hedge fund managers in the world earned $13 billion in 2015.
I do believe we need some perspective here again. $13 billion dollars means more than the whole economies of countries such as Cyprus, Nicaragua, the Bahamas or Namibia.
Now think about the fact that this immense sum of money belongs to just 25 people, and you will understand why all the hedge fund jobs, in general, are such a fantastic dream to pursue.
The Institutional Investor’s Alpha magazine published the list of all the hedge fund managers and how much they earned in 2015 earlier this year.
Apart from all the sums and earnings, it makes for quite an interesting piece of reading material.
What I found thought-provoking was the fact that the hedge fund manager earning list dwarfed out even the best-paid Wall Street executives.
Their highest winning banker in 2015 was Jamie Dimon, the CEO of JP Morgan Chase. He earned a reported $27 million in one year alone.
Another thing I found fascinating was the fact that all these high earners from the hedge fund managing field still collected big bucks at the end of the year, despite what happened in their business. We all know that 2015 was quite a tumultuous year on Wall Street. Many hedge funds lost dollars in the billions, and even more of them closed down.
Hedge Fund Manager Salary:
The CEO of Third Point, Daniel Loeb, described the conditions of the market for last year as a ‘hedge fund killing field.’
Third Point is a hedge fund which manages $17.5 billion and if its CEO thought the market was bad last year, then it was bad. Still, this makes me believe that, if the top hedge fund managers were still able to earn so much in such a bad market, then hedge fund jobs are everything they are hyped to be.
If you want some numbers to go with this statement, here they are. Despite everything that they faced in 2015, Griffin and Simons increased their earnings with $500 and $400 million respectively compared with 2014.
Allow me to move on to the second highest earner in the top 25 for 2016.
James Simons is an expert in string theory and a former codebreaker during the Cold War. Some 34 years ago he started a company called Renaissance Technologies which is a ‘quant’ hedge fund driven by mathematics.
They are currently running the hedge fund from a small village in Long Island called Setauket.
Simons is also the 50th richest person in the world, according to Forbes and he retired as CEO of his company back in 2009.
Going back to the idea of the hedge fund salary, Simons’ earnings were so big in 2015 that if I were to compare him to a country, he would be the 178th richest in the world.
If you’re wondering how that’s possible, since I already mentioned that he retired from his job as a hedge fund manager, he still benefits from it.
At the age of 77, James Simons has a continuing role in his former company. He also benefits from its funds, especially when it comes to the incredibly profitable and very secretive black-box machine known around the industry as Medallion.
His hedge fund, Renaissance, manages resources for an entire plethora of outside investors. Therefore, in 2015, the fund was up some 17 percent net of fees. This is the Renaissance Institutional Equities company. The Renaissance Institutional Diversified Alpha was up an approximate 16 percent.
James Simons made donations in the millions of dollars toward education in the realms of math and science, all via the foundation he set up almost 20 years ago, called the Simons Foundation.
Now that I’ve given you some background on how high the hedge fund salaries can go, it’s time to ask the question you’ve all been waiting for. Is the industry itself that lucrative? Can you get where Ken Griffin and James Simons are today?
The first thing you must be aware of is that, after you graduate from your school of choice as a hedge fund manager, your salary will still be pretty small.
And that is if you can lock in a job with a hedge fund because, as we all know in this industry, they are notoriously hard to get. However, don’t despair because when I say small salary, it’s not what you imagine.
The low wages in a hedge fund are still quite high compared to what the general population makes. And if you add the bonuses, you can go as high as $100,000 per annum as a beginner hedge fund manager. This is more or less the same as the portfolio manager salary.
Do you need some perspective on this idea as well? There are no other fields in which a beginner can make this amount of money in a year.
Evidently, as you progress and ascend to higher positions, you will earn more money as well. Both from your basic salary and from your bonuses. Even so, you must remember the following concept.
Hedge funds get the best part of their income from their management fees. They also take a cut from the overall profit. Therefore, the more money you are managing and the higher a return per year you have, the more money you will make.
In fact, it is a well-known truth that a hedge fund manager with five to ten years of experience in the field brings in an average salary of $1 million every year.
When you start and own your personal hedge fund, the payment deal becomes somewhat more complicated than that. Allow me to detail. Typically, the owner of a hedge fund invests his private money in it, which means he or she has to grow it somehow. If this is your case as well or if you are thinking of going down this path, you will get to keep the surplus of all the management fees and profits after you have paid your employees.
This idea means that what I’ve told you above doesn’t apply anymore to a private hedge fund owner. It also means that you have a very high chance of making a huge deal of money in a very short time.
When it comes to describing or pinning down the concept of a hedge fund manager salary, you will find out that it’s a difficult thing to do.
There are just so many variables that one cannot apply a pattern over it. But one thing I can tell you from analyzing the careers of others, as a hedge fund manager, you start from the hedge fund internships or beginner salaries which bring in about $100, 000 per annum, and you end up earning almost $1 billion.
Therefore, as I said, yes. The hedge fund manager salary is a dream come true.