With the release of Alpha magazine’s list of the salaries of hedge fund managers in 2006—the top manager, James Simons, earning $1.7 billion—the question arises: Are these guys worth it, The New York Times reports. Simons’ salary is roughly the same amount the U.S. government spent maintaining the nation’s national parks.
The answer is, maybe not. Last year, according to
While the top performers “winning the Darwinian competition for capital,” as The Times puts it, delivered returns of as much as 44%, that isn’t likely to continue.
With all of the money flowing to hedge funds, particularly from pension plans, it will be increasingly difficult for hedge fund managers to deliver outsized returns. Yet because hedge funds charge a large percentage, typically 2%, of assets under management, regardless of the returns, they will still take home gargantuan salaries.
