Hedge Fund Compensation

Sunday, April 20, 2008 | 08:04 AM

Earlier this week, I asked, "What's Wrong With Billionaire Fund Managers?"

We noted the very top % of this profession carried enormous compensation for those Alpha creators who earned tremendous returns for their partners. Most of the top earners are also have very significant holdings in their own funds.  They not only get paid for taking risks with OPM, but with their own money at risk as well.

At the same time, if you really want to be upset at enormous paydays, the collection of thieving former CEOs who helped destroy shareholder value then parachuted out with 100s of millions of dollars were better targets for your ire.

All About Alpha looked at manager compensation from a different perspective, and asked Is high hedge fund compensation really that new?

Their approach was from a different angle, based on both earnings size and source

1. Appreciation vs. Compensation
2. Paper vs. Cash
3. Income vs. Options
4.  “Creating” vs. “Speculating”

Here is the quadrant they put together:

2by2

In today's NYT, Harvard prof Greg Mankiw also looks at wealth disparities, using Lloyd C. Blankfein, chief executive of Goldman Sachs and Bill & Hillary Clinton as examples (The Wealth Trajectory: Rewards for the Few). 

Note to Professor Mankiw: From a statistical perspective,  perhaps another example from a pool of candidates greater than three (living former US Presidents) or one (the most recently retired President) might be more suitable, informative and tad a less political. That choice tainted an otherwise fine article...


Exec_pay

Courtesy of NYT

>

Previously:
What's Wrong With Billionaire Fund Managers?    http://bigpicture.typepad.com/comments/2008/04/whats-wrong-wit.html

Source:
Is high hedge fund compensation really that new?   
All About Alpha, 17 April 2008
http://allaboutalpha.com/blog/2008/04/17/is-high-hedge-fund-compensation-really-that-new/

The Wealth Trajectory: Rewards for the Few   
N. GREGORY MANKIW
NYT, April 20, 2008   
http://www.nytimes.com/2008/04/20/business/20view.html

Sunday, April 20, 2008 | 08:04 AM | Permalink | Comments (72) | TrackBack (0)
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Comments

You kept telling us how they put there money at risk. Look if the game is fixed, is their money at risk? Take a basketball analogy. You bet on your team to win. You put your money at risk. Is the risk more or less if you know the players in the game. You know one player and he is going to to toss the game for extra reward. Certainly your money is at some risk depending on how much this guy will be able to control the game. Certainly not as much as if you didn't know anything.

CEO's didn't create a false market to get rich. They didn't fall back on taxpayers to bailout their poor choices.

If you honestly think that hedgies are not using taxpayer money now to play in oil futures, your blind. That is going to affect everybody that posts here. I don't think you can say that about any golden parachutists.

Posted by: Ken H. | Apr 20, 2008 8:40:07 AM

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