Top 25 Hedge Fund Managers Made Almost $1 Billion EACH in 2010 (Not an April Fools Joke)

1 Apr

You read that heading right.  According to Absolute Return+Alpha, the top 25-earning hedge fund managers made over $22 BILLION (yes, with a B) last year, with 6 of the top 10 making over a billion (again, with a B) each. To put things in perspective, if you made more than $10,000,000 last year, you were in the top 0.01% (well, 0.0095%) of filers.  These guys made 50, 100, 300x that much.

In 2006 (the last year the IRS makes the data available), only 400 filers reported income of more than $110,000,000, and the entire reported income for those top 400 filers was only slightly over $8,000,000,000.  That’s the same amount Bridgewater’s Ray Dalio and Paulson & Co’s John Paulson reportedly made last year.  Think about that.  Last year, TWO people made as much as the 400 highest-earning people did just a few years prior.

While I have a much, much (much!) longer essay in the works about income inequality and the drivers thereof, I think this a good time to touch briefly upon the subject.  This week alone, I’ve read three articles decrying the top 1% (explicitly or otherwise) as making off the the Country, at the expense of Everyone Else.  This is bullshit.

Instead of attacking the top 1% – the income floor on which is about $400,000 – or really attacking any income group, we should be asking why people are in these groups, how they got there, and what they’re doing differently from Everyone Else that such a large % of income continues to accrue to them, increasingly so.  I can promise you that every fund manager in that top 25 list works at least 70 hours/week, probably closer to 100 if you count “social” events that are really business by any other name.   What about CEO’s, investment bankers, traders, power-lawyers, doctors, consultants, and other top professionals?  Same thing.  What about professional athletes and entertainers, surely their lives are more relaxed, right?  Wrong.

In reality, the only people in the top 1% who don’t work insane hours under (often) similarly insane pressure are, in the immortal words of Gordon Gekko, “widows and idiot sons” i.e. those living off the interest/capital gains from their inheritance/trust funds.

I doubt there’s many in the top 1% that works 40 hour weeks with 3+ weeks of paid vacation and another week or two of sick/personal days.  Similarly, I doubt there’s many in this group that have a defined-benefit pension and/or are members of a union.  In the ultimate analysis, critics of “the rich” have to acknowledge that the vast majority have not only taken significant career/lifestyle risks to get where they are on the earnings ladder, but have sacrificed what most of us would deem a “normal” life (and quality thereof).

With extremely rare exception, you can’t have your cake and eat it, too.  Blind jealousy without context is self-defeating; you simply can’t attack “the rich” without acknowledging and accepting that most people – indeed the vast majority thereof – lack the dedication, work ethic, personality, and general inclination to do what it takes to make it into the upper echelons of earners.  But once you do accept this fact, income inequality, tax policy, and social mobility debates take on an entirely different tone.  Alas, even those who should know better seem to have a hard time opening their eyes…

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6 Responses to “Top 25 Hedge Fund Managers Made Almost $1 Billion EACH in 2010 (Not an April Fools Joke)”

  1. Ben Abramov April 1, 2011 at 2:50 pm #

    Hard work? 70 hours weeks? Try working 12 hours a day, 7 days a week, without a car, without health care, without any type of social safety net to rely on.

    I’m talking of day-laborers, cleaning ladies, waitresses, janitors, and, generally speaking, the servant class. What say you about these folks who work multiple jobs to make ends meet, stand on their feet day-in-day-out cleaning other peoples excrement.

    If you are open to expanding your horizons on the issue, try reading this book: http://www.amazon.com/Nickel-Dimed-Not-Getting-America/dp/0805063897

    • The Analyst April 1, 2011 at 3:07 pm #

      Virtually all of the “day laborers” of which you speak that I’ve encountered the past 10+ years are not U.S. citizens, or perhaps more accurately, are relatively recent immigrants, seldom with English as their primary language. I can’t remember the last time I actually met, saw, or even heard of a day-laborer that was born in the U.s, and its even more rare that I see a caucasian, U.S. citizen laborer (not to say they don’t exist, of course), even with such high unemployment the past few years.

      How many of these laborers of which you speak have a high-school education? How many have more than that? I’m going to guess not many. How many have at least one child? I’m going to guess most. These are people who have chosen (and to some extent, in some cases, were thrust into circumstances) not to pursue advanced education (increase in knowledge, etc) while trying to raise a family.

      You do not need a college diploma to realize that raising a family on $10/hour is extremely difficult, so I’m sorry, but I just don’t have much sympathy for people in such situations.

      To the few day laborers who are busting their ass due to situations largely outside of their control, that’s great, that’s amazing, however, I think its more the exception than the rule.

      • Larry Mitchell April 1, 2011 at 3:23 pm #

        @The Analyst,

        The above post was just an example, there are tons of people – the vast majority of whom are citizens of the US – who work two jobs trying to make ends meet.

        My father, for example, has a college degree and works nearly 90 hours a week at two businesses and brings home about $60k a year. The idea that those who are not wealthy can’t compare themselves to those who are because they don’t work hard is asinine.

        • The Analyst April 1, 2011 at 3:52 pm #

          I don’t think I ever said “those who are not wealthy can’t compare themselves to those who are because they don’t work hard.” All I said was that the majority of those who make alot of money work their assess off, have spent years (if not a decade) on post-highschool education/training, etc. I didn’t say that those who are not in this group did not make same/similar sacrifices, because as in the case of your father, many have, and that speaks very highly of his character and work ethic.

          If you don’t mind obliging us, would you mind sharing more detail about your father? What is his degree in? What does he do for work? Why did he choose this path (or what happened that this is the what he’s doing)? While just one example, I’m always curious to hear people’s stories; every little bit we can learn about how each other lives gives us more perspective.

          Thanks for commenting!

          • Larry Mitchell April 1, 2011 at 10:05 pm #

            He was an electrical engineer for 20+ years and after the dot com bust in the late 90s he was laid off. He tried to get another engineering job for a couple years but after being unable to find anything he’s done various jobs since. Currently he manages two small restaurants.

  2. perrymecium April 3, 2011 at 3:52 am #

    “the only people in the top 1% who don’t work insane hours under (often) similarly insane pressure”

    People need to learn to read more carefully. What makes the top .1% so special isn’t just that they work harder than everyone else but that they also face unique pressure to do a job that is extraordinarily difficult. And yes, your choice to trust someone with billions of dollars of family fortunes and pensions is not quite as easy as finding someone willing to clean up after me.

    But if you want to spend your pity on people who work just as hard as the top .1% but get paid like a day laborer, then start clamoring for the plight of PhD students and post docs. They make huge sacrifices for education, make monstrous efforts for a minimal chance of advancement, and get paid slave wages for their trouble.

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