A hedge fund manager salary is nothing to sneeze at. It can top four billion dollars. (And you thought doctors were well paid.)
The highest paid manager, David Tepper made $4B. Tepper did this by making a contrarian bet on financial companies.Runner up, George Soros, didnâ€™t do so bad either. He made a mere $3.3B by generating 29% returns through global macro investing.
In fact, the average salary of the top 25 hedge fund managers in the world was $1B. Not a bad salary for a yearâ€™s worth of work. To put this in perspective, this is equivalent to 20,000 people making $50K per year.
Take that Tiger Woods!
So the real question is how do you join the club? The answer is simple, you have to mint money by investing. The best fund managers get 20% of the profits that they generate.
How to Make $1B
So if you want to make a $1B salary, you have to make $5B for your investors. Simple, right?
So how exactly do you make $5B?
You start by making great investments. Now I’m not talking about 1X or 2X returns. I’m talking about 10X to 50X returns like those that were made during the implosion of the subprime bubble by hedge fund managers like John Paulson.
Sure you could make 50X betting on some penny stock option. But how much money would you put into that trade?
So the second key is to find a trade where the risk of loss is so small that you can bet big.
What you are looking for is a trade that is massively asymmetric, where you are risking a penny to make a dollar and so your risk of loss is very small relative to the potential payoff.
Back in 2007, Paulson paid a few basis points to buy protection on subprime mortgage backed securities and he made billions when they defaulted.
You might think that these opportunities are long gone, but one hedge fund manager who is responsible for more than $15 billion dollars in assets begs to differ.
He says that “all of the asymmetry in the world lies in [this trade]”.
To find out what this massively asymmetric trade is, enter your email below.
Keep in mind that this is definitely not investment advice, I am merely sharing information that I found interesting and think that you might find interesting too.