Looking back at Tepper’s then­-record $4 billion haul and the beginning of a Hermitage tragedy

April 06, 2011   Lawrence Delevingne

AR also revisits the staying power of high fees and the volatility of industry assets.

One year ago

»» Despite their elevated importance following the 2008 hedge fund shakeout, investors failed to get most managers to lower their fees. An analysis of the AR database showed that there was only a minor change in the management and incentive fees charged by hedge funds in the Americas since early 2009.

Average terms aren’t much different today. As of year-end 2010, among the nearly 1,900 funds in the AR database that disclosed their fees, the average management fee was down, while the average performance fee was slightly higher.

 David Tepper: A happy man

»» AR released its ninth annual Rich List, a ranking of the highest-earning hedge fund managers. Together, the 25 top earners made a record $25.33 billion, beating the 2007 record of $22.3 billion. It was a huge comeback from 2008, when the heavyweights' earnings were more than cut in half, to about $11.6 billion. No. 1 was Appaloosa Management's David Tepper, who earned a record $4 billion.

John Paulson made even more in 2010. The Paulson & Co. founder made a record $4.9 billion to claim the top spot on the 2011 edition of the Rich List, giving him $12.9 billion in earnings over the past four years alone. Generally 2010 was only the third-most lucrative year for the top managers following the blowout in 2009. The top 25 made a total of $22.07 billion in 2010, down nearly 13% from the $25.33 billion earned the prior year and slightly less than the $22.29 billion earned by the top 25 in 2007.

Five years ago

»» It came to light that U.S.-born hedge fund manager William Browder had been mysteriously denied entry to Russia while attempting to return to the Moscow headquarters of his $4 billion firm, Hermitage Capital Management.

The confrontation between Hermitage and the Russian government would escalate and ultimately turn tragic. A Russian lawyer for the hedge fund, Sergei Magnitsky, died under brutal conditions in prison while awaiting trial relating to allegations he and Hermitage made related to massive government tax fraud. Browder recently commented on these incidents in a February 24 opinion piece in the Wall Street Journal.

»» The assets of the global hedge fund industry crossed $1.5 trillion.

Today, global hedge fund assets stand at $2.022 trillion as of yearend, up from $1.820 trillion a year earlier. The latest gains bring industry assets back to their 2006 level, but below the peak of $2.6 trillion achieved in 2007.

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