Hedge Fund Managers Average Salary $657 Million A Year; Criticism of pay for fund execs grows

[EV_Ares]

NEW YORK — To say the pay gap between Wall Street's top titans and average Americans is widening would be an understatement.
One statistic sums up why: Last year, the top 20 hedge-fund and private-equity-fund managers earned more in 10 minutes than U.S. workers made the entire year, according to a report released Wednesday by two research groups.

Those top fund managers pocketed an average $657.5 million in 2006, or 22,255 times the $29,544 average annual pay of U.S. workers, said the study issued by the Institute for Policy Studies (IPS) and United for a Fair Economy. That dwarfs the discrepancy between CEOs and workers: Corporate chieftains, on average, earn about 365 times the pay of U.S. workers.

The study was the latest criticism leveled at private-equity firms and hedge funds, which have become the poster children of financial excess. Lawmakers, labor unions and corporate governance advocates have taken aim at private investment funds this summer.

Politicians have long sought closer scrutiny and oversight of hedge funds. In recent months, lawmakers have eyed increasing the tax on private-equity firms' earnings. Private-equity firms now are taxed at the 15% capital gains rate, vs. a 35% top tax rate on ordinary income. Labor unions have criticized private-equity firms for laying off workers after acquiring companies, to improve efficiencies.

(Entire article @ link below)

http://www.usatoday.com/money/companies/management/2007-08-29-private-equity-pay_N.htm

[Phoebe Loosinhouse]

1. This makes me think that the ultra rich who invest in hedge funds are morons

why does anyone anywhere think that someone, (who is probably relying on mathmatical hypotheses based on past performance and run by math gremlins) is worth this kind of money that would be SHRINKING their own returns?

At least this is the ultra rich scamming the ultra rich. These guys have found the ultimate "greater fool". Boy are they ever. It must really hurt to lose millions and millions of personal dollars. The rest of us poor schmucks will be called on to bail them out because "they're TOO BIG to go under"

No, they're not. The money that evaporates into the ether will be from the super rich. They will have to downsize from 10 castles to 5. Boo hoo.

[BlooInBloo]

3. Sure, if one believed that the future is completely independent of the past....

.... Then to purchase a service based upon the opposite hypothesis would be foolhardy.

[Phoebe Loosinhouse]

8. "past performance is no guarantee of future returns"

Mathmatical models predicated on "past performance" seem to belie this oft repeated disclaimer.

Kind of a no-win situation for the fund managers. It's either past performance or reading entrails.

[BlooInBloo]

9. Nobody ever, ever said it was, including me.

[Warpy]

4. One reason I dumped Merrill Lynch

was because they started to push hedge funds at me. To me, those funds have always been where the greedy go to get fleeced, ultra risky ventures using a bunch of casino like tactics that promise huge gains but rarely deliver them for small fish like me.

It looks like the odds were always with the house, and the CEO represents the house.

[R_M]

6. Hedge Funds are a legalized scam.

[NashVegas]

11. Yeah

At least this is the ultra rich scamming the ultra rich.

To an extent, yes, but their decisions affect the companies they buy and sell.

These people want to have the kind of assets Berkshire Hathaway has, but they want to get there by taking short cuts. They don't want to wait 40 years to build up the value that Buffet has.

[BlooInBloo]

2. Needs to be taxed an normal income rates, but otherwise, rock on....

... I have no intrinsic hatred of the rich. As long as they're not defrauding people, let them get paid what people want to pay them.

[SharonAnn]

7. They don't "earn" that much. They found a way to get "paid" that much.

There's a difference.

They've managed to rig the game with cronyism and put all that money in their pocket. They absolutely, positively did not "earn" it.

[BlooInBloo]

10. I never said anyone "earned" anything. But as long as there are people willing to pay them...

... I fail to see why they should be permitted to sell their labor (an economic term) for the going market rate.

[Deja Q]

5. When I read "pay gap", for some reason I subconsciosuly melded them to make "pap".

I honestly cannot fathom how nor why...

[Gabi Hayes]

12. but but but, what about Edwards? isn't this his fault?

doesn't he live in a great big house and get expensive haircuts?

isn't that more important?

[RB TexLa]

13. Who is there to complain? They are paid by the funds, by the investors in the funds

if the people paying them don't like what they are paid they can pull their money. They are paid by performance if they guide a fund to create billions for the investors I see nothing wrong with the $600M+ number.

[EV_Ares]

14. There is a lot to complain about; They may yield some spectacular

returns, attract lots of money and they generate great, great wealth for those at the top. Now with so many people doing the same thing, investment returns decline, as do ETHICS and the quality of financial reports. Then come the SCANDALS, the lawsuits and the rush for the exits, followed at times by convictions or regulatory settlements. If you need more proof that the hedge fund bubble is about to burst, consider that last year, fund manager Eddie Lampert reportedly broke through the billion-dollar annual compensation mark -- apparently for his brilliant idea of combining Kmart and Sears into one giant retail failure.

At a minimum, hedge funds should be required to send audited, quarterly statements to investors and the SEC. With college endowments, insurance companies, pensions and mutual funds now so heavily invested in hedge funds, this has gone well beyond protecting rich investors.

With $1 trillion in assets, hedge funds have become a dominant force in capital markets, accounting for as much as half the daily trading on the stock market, hundreds of billions of dollars in bank loans and a healthy chunk of the profits of Wall Street brokerages. Federal regulators cannot guard against systemic risk to global markets if they don't know what hedge funds are doing.

This is not a case of a few rotten apples. It's a case of an industry that has become so rich and arrogant -- and so littered with charlatans and con men -- that government must step in to protect the public interest.

[Phoebe Loosinhouse]

15. Pension fund managers have no business putting money into unregulated hedge funds

They might as well buy Beanie Babies.