The top 25 hedge-fund managers earned $11.6 billion in compensation in 2014, an average of $400 million each, even as hedge funds overall posted a mediocre year.
Indeed, hedge-fund pay for these top managers was down sharply from 2013 and at the lowest levels since the Great Recession.
A survey by trade publisher Institutional Investor’s Alpha magazine, known as the Rich List, found that the top earner last year was Kenneth Griffin, founder and chief executive of Citadel Group, based in Chicago, who took home $1.3 billion in fees and gains on his own capital.
Griffin was followed closely by James Simons, founder of Renaissance Technologies, based in East Setauket, N.Y., who personally earned $1.2 billion, the magazine said. Renaissance uses computers to trade a wide range of securities.
A Citadel spokesman declined to comment on Griffin’s pay. A representative of Renaissance said Simons retired in 2010 and was no longer with the firm. Simons didn’t immediately respond to an email sent via the firm to an assistant.
Citadel posted overall gains of 18.3 percent, the magazine said. But many hedge funds failed to match the Standard & Poor’s 500 index, a common proxy for the broad stock market, which posted returns of 13.7 percent in 2014. Twelve of the funds run by the 25 earners posted returns in the single digits, the magazine said.
Overall, 2014 was a dismal year for hedge funds, at least as far as performance. The HFRI Fund Weighted Index, which measures the industry overall, returned a mere 2.98 percent, according to HFR, a New York research firm.
Typically open only to well-heeled or institutional investors, hedge funds employ a range of strategies — usually involving publicly traded stocks and bonds — to try to outperform the market or to offer investors a way to diversify, or hedge, their main bets in the broader markets. Hedge funds often charge 2 percent of assets under management and a percentage of profits, making them a lucrative business for financiers.
William Ackman, whose New York-based Pershing Square Capital Management is embroiled in a long-running short-selling campaign against Herbalife Ltd., based in Los Angeles, was fourth on the list, earning $950 million in 2014. Pershing Square funds earned between 36 percent and 40.4 percent last year, the magazine said, helped in part by a bet on pharmaceutical company Allegan Inc., which was sold last year to Irish rival Actavis.
A spokesman for Ackman declined to comment.
Despite the huge payday last year, hedge-fund compensation in 2014 actually tumbled from the previous year, when the top 25 managers earned $21.5 billion, with the average earning $846 million. To qualify for the list, managers had to earn a minimum of $175 million, down from $300 million a year earlier, the magazine said.
Pay for top managers was the lowest since 2008 – the year the financial crisis hit – the magazine said.