By Stephen Taub
Call it the year of the management fee. In 2011 no fewer
than 11 individuals garnered a spot on AR's 11th annual Rich
List ranking of the 25 top-earning hedge fund managers despite
delivering only single-digit investment gains in their funds
for the year. They can thank their firms' sizable coffers:
Although these managers couldn't bank much from the 20
percent-plus performance fees for which hedge funds are famous,
they found that management fees - originally designed to cover
basic operating costs - have become a major profit center as
firms' assets have grown significantly larger.
Altogether the 25 highest-earning hedge fund managers earned
a combined $14.4 billion last year, down from more than
$22 billion in 2010 and the lowest sum in three years. The
median earner made $235 million, down from $400 million in 2010
and $500 million in 2009, while the average earner reaped $576
million, down from $883 million in 2010 and nearly
half the $1.1 billion average in 2009. Still, the total
rose 24 percent from 2008.
The managers at the very top of this year's Rich List bucked
the trend of lackluster performance. Seven of the eight highest
earners steered their respective hedge funds to double-digit
net gains, while all eight generated double-digit gross returns
- an impressive accomplishment given that the average hedge
fund lost more than 2 percent last year, according to the
HedgeFund Intelligence Composite Index.
Bridgewater Associates founder Raymond Dalio tops this
year's list with a $3.9 billion payday for 2011. Bridgewater is
now the largest hedge fund in the world, with some $70 billion
in hedge fund assets under management (and $120 billion in
total assets). In the past two years, the 63-year-old Dalio has
made $7 billion.
Dalio was not the only hedge fund manager to rack up
spectacular gains in the market last year. Carl Icahn, the
second--highest earner, brought home $2.5 billion from
aggressive activist battles with companies such as natural-gas
producer El Paso Corp. Renaissance Technologies Corp. founder
and nonexecutive chairman James Simons earned $2.1 billion
after his two largest funds earned mid-30 percent returns.
Tiger Global Management's Chase Coleman rode the boom in
Internet stocks to a 45 percent net return; the $550 million he
made won him the No. 6 position on the list.
But many others posted gains in the low single digits. That
explains why a manager needed to earn only $100 million to
qualify for this year's Rich List - the lowest minimum in four
years. Of those managers who made the list thanks to management
fees, most also have a large sum of their own money invested in
their funds; this combination of gains from their own capital
on a modest return plus their share of the fees was enough to
put them on the list. Those who qualified in this manner
include SAC Capital Advisors' Steven Cohen, who made $585
million even though his main fund was up just 8 percent net of
fees; Viking Global Investors co--founder O. Andreas Halvorsen,
who earned $300 million despite the fact that his flagship fund
was up 7.6 percent; and Tudor Investment Corp.'s Paul Tudor
Jones II, who earned $175 million after his main fund, Tudor
BVI Global, gained less than 3 percent.
This year's list also features eight newcomers: Greg Jensen
and Robert Prince of Bridgewater, Peter Brown and Robert Mercer
of Renaissance, Elliott Management Corp.'s Paul Singer, Jeffrey
Ubben of ValueAct Capital, Coatue Management's Philippe Laffont
and Boaz Weinstein of Saba Capital Management. These managers
proved that even in extremely difficult market conditions, it
was still possible to deliver outsize returns.
Fifteen individuals who were on the 2010 Rich List failed to
qualify this year. They include George Soros, who returned
outside capital in 2011; Caxton Associates founder Bruce
Kovner, who just missed making the list, having earned close to
$100 million; and John Paulson - the top hedge fund money
earner one year ago after making a Rich List record of $4.9
billion in 2010.
1 Raymond Dalio
What do you get when the founder of the world's largest hedge
fund firm racks up one of the year's best returns? The
highest-earning hedge fund manager. Ray Dalio's Bridgewater
Associates, which began 2011 with nearly $59 billion in hedge
fund assets and finished with about $70 billion - for a total
$120 billion in assets - posted a 16.05 percent return for Pure
Alpha, its largest hedge fund. Thanks to gains on his
substantial personal capital in Bridgewater's funds and his
share of the hefty fees, Dalio, 63, earned about $3.9 billion
last year. That's nearly ten times the $400 million he made in
2009, when Pure Alpha was up just 2 percent.
(Illustration by David M. Brinley)
In 2011, Westport, Connecticut-based Bridgewater was said to
benefit mostly from investments in U.S. Treasuries; it was
shrewdly bearish on the U.S. economy early in the year and
participated in the subsequent rally in Treasury prices, German
bonds and the Japanese yen. This year Bridgewater is looking
for gold to rise, figuring several countries will intentionally
inflate their money supplies to help reduce debt. Bridgewater
is also looking for strength in emerging-markets currencies and
lower yields in what it deems to be high-quality government
bond markets, according to reports.
Dalio attributes Bridgewater's controversial corporate
culture, which encourages blunt honesty among all employees,
for a big part of the firm's success, even though it has
received a fair amount of criticism. Bridgewater has made about
$50 billion for its investors since Dalio founded it in 1975
from his two-bedroom New York apartment.
2 Carl Icahn
ICAHN CAPITAL MANAGEMENT
Carl Icahn's activism paid off big-time in 2011. While more
than half of all hedge funds were in the red, the 76-year-old
onetime corporate raider racked up a 34.5 percent gross return.
As a result, he personally earned $2.5 billion even though he
returned all money to his outside investors last April. Icahn
generated nearly half of his gains in the fourth quarter, led
by natural--gas company El Paso Corp., which agreed to be
acquired by Kinder Morgan some three months after Icahn began
building his position. His other big winners: biotech company
Biogen Idec, communications companies Motorola Mobility
Holdings and Motorola Solutions, and Chesapeake Energy Corp. In
a recent regulatory filing, Icahn calculated that over the past
few years his actions have boosted aggregate market value by
more than $55 billion for shareholders at well over a dozen
companies he's targeted. Last year, when he announced his plan
to return all outside investor money by April 2011, Icahn
stressed that he was not predicting a big drop in the market.
However, he did not want to experience another year like 2008,
when his fund lost 35 percent and he did not restrict investors
from pulling their money. "Given the rapid market run-up over
the past two years and our ongoing concerns about the economic
outlook, and recent political tensions in the Middle East, I do
not wish to be responsible to limited partners through another
possible market crisis," he wrote. At the time, fee-paying
assets represented one quarter of the roughly $7 billion Icahn
managed in the funds.
3 James Simons
RENAISSANCE TECHNOLOGIES CORP.
Talk about rising from the dead. In 2009 the Renaissance
Institutional Equities Fund had lost money for two straight
years, and the co-CEOs of Renaissance Technologies Corp., which
manages the fund, threatened to shut it down. Wisely, they
didn't. Last year RIEF surged about 34 percent. The huge gains
in RIEF and the firm's Medallion funds enabled Renaissance
founder James Simons, 73, to rake in more than $2 billion last
year, mostly from returns on his own money, even though he
officially retired in 2010. Simons, an award-winning
mathematician, still serves as nonexecutive chairman of the $20
billion East Setauket, New York-based hedge fund firm.
Simons (Illustration by Agata Nowicka)
RIEF pursues a net-long investment strategy, going roughly
150 percent long and 50 percent short, trading U.S. and
non-U.S. equity securities listed on U.S. exchanges.
Renaissance's legendary Medallion strategy, which was up about
35 percent last year, employs a short-term quantitative trading
strategy and has been closed to outside investors for many
On March 1 the firm launched a new vehicle, the Renaissance
Institutional Diversified Alpha Fund, which will trade stocks
listed on U.S. exchanges as well as futures and forwards.
Renaissance also has a little-known fund of funds called
Kaleidoscope that invests in the firm's other funds.
A noted philanthropist, Simons, along with his wife,
Marilyn, donated $150 million late last year to Stony Brook
University - one of the largest gifts ever made to any
institution of public higher education. Simons is a former
chairman of the school's math department; his wife, who has a
Ph.D. economics, is an alumna of the university.
4 Kenneth Griffin
It took nearly three years, but Citadel founder Kenneth
Griffin can finally say that he and his funds are above water.
The firm's multistrategy funds Kensington Global Strategies and
Wellington - which account for the bulk of the Chicago-based
firm's $11 billion in assets - netted gains of more than 20
percent in 2011, overcoming the 55 percent they lost in 2008.
(The fact that the funds are back above their high-water mark
means that Citadel can start charging performance fees
This strong showing placed Griffin, 43, among the top
performers as well as the highest earners last year. Although
Kensington and Wellington were profitable across all
strategies, they were said to have done especially well in
equities, energy and convertibles. In addition, the Citadel
Global Equities Fund was up more than 21 percent in 2011. In a
recent letter to clients, Griffin boasted that his Global
Equities team had posted its tenth consecutive year of
Griffin famously launched his career trading convertible
bonds from his dorm room in Cabot House at Harvard College,
graduating in 1989 with a BA in economics. He launched Citadel
the following year. Griffin and his wife, Anne Dias-Griffin,
who runs hedge fund Aragon Global Management, are ramping up
their spending on political candidates and the Republican
Party. In the third quarter of 2011 alone, they gave $300,000
to American Crossroads, a political action committee that seeks
to defeat President Obama.
5 Steven Cohen
SAC CAPITAL ADVISORS
SAC Capital Advisors founder Steven Cohen, 55, is known as
the consummate trader, delivering double--digit returns for the
better part of two decades. Although last year's 8 percent net
return by SAC's flagship multistrategy fund was among Cohen's
worst annual results, apart from its 19 percent loss in 2008,
the fund's gross return of 16 percent was easily among the best
hedge fund performances of 2011. The fund, which charges a
whopping 50 percent performance fee, did especially well in
discretionary long-short equity, earning most of its gains from
the energy, retail and technology sectors.
Cohen, whose firm operates out of plush offices in Stamford,
Connecticut, decorated with works from his vast collection of
contemporary art, has a proclivity for making headlines. He is
in the running to buy the Los Angeles Dodgers baseball team and
is rumored to be plunking down $20 million to purchase a small
piece of the New York Mets as a hedge in case he loses out on
But Cohen garnered embarrassing publicity from the federal
government's wide-ranging, ongoing investigation of insider
trading activities: No fewer than seven former SAC employees
ran afoul of regulators. Two of them pled guilty to criminal
charges, in part for actions that took place while they worked
at SAC; the rest settled civil claims made by the Securities
and Exchange Commission.
Earlier this year two other former SAC employees were
arrested - Anthony Chiasson, who co-founded Level Global in
2003 with SAC alum David Ganek - and Jon Horvath of SAC
affiliate Sigma Capital Management. Neither Cohen nor SAC has
been accused of any wrongdoing.
Top Earners 6-25