Hedge fund managers set new payout records in 2007
BOSTON (Reuters) - A handful of the world's top hedge fund managers took home 10-figure paychecks last year that set records for the highest-ever payouts on Wall Street.
John Paulson, who ran a medium-sized hedge fund until last year, ranks as the loosely regulated hedge fund industry's highest-paid manager, earning an estimated $3.7 billion, data from Institutional Investor's Alpha Magazine shows.
Trader Monthly, which released its figures last week, also said Paulson was the highest paid, earning an estimated $3 billion.
Paulson, who now oversees roughly $28 billion in assets, earned his payout by standing conventional wisdom on its head and betting U.S. housing prices would decline nationally, and that investment-grade mortgage bonds would default in record numbers.
"Some managers have profited enormously from the collapse of the U.S. subprime mortgage market," the magazine said in a report published on its Web site. "However, making money has gotten more difficult as banks that were caught holding troubled subprime paper have reduced lending to hedge funds."
George Soros, the philanthropist fund manager who was reported to have earned $1 billion by betting against the British pound in 1992, was the next-highest-paid manager. He took home $2.9 billion this year, Alpha Magazine said.
Following close behind Soros was James Simons, a former mathematics professor turned fund manager, who runs hedge fund group Renaissance Technologies and took home $2.8 billion.
Phil Falcone, a former Harvard hockey star whose shrewd housing market bets at Harbinger Capital Partners netted him a $1.7 billion payout, was the fourth-highest-paid fund manager.
Ken Griffin, who founded $20 billion Citadel Investment Group from his college dormitory room, followed behind in the number-five spot with an estimated $1.5 billion payout, Alpha Magazine said.
Hedge funds are traditionally secretive because they want to protect their trading strategies from would-be competitors, and so their managers' salaries are similarly shrouded.
But the numbers began trickling out last week and sent a new round of shock waves through turbulent markets at a time when U.S. job losses are mounting, growth is slowing and the housing crisis seems to be deepening.
The Alpha survey also said so-called funds of funds, portfolios that try to minimize risk by selecting a group of hedge funds for clients like pension funds, earned far less than the highest-paid hedge fund manager.
Chief executives at those firms took home an average $1.8 million, including bonuses.
Average take-home pay for junior traders at multi-strategy and single-manager firms topped $200,000 in 2007. Meanwhile, pay for senior traders was an average $819,000 at multi-strategy firms, and topped $1.6 million at single-manager hedge funds.
(Reporting by Svea Herbst-Bayliss, with additional reporting by Emily Chasan in New York; Editing by Braden Reddall)