What is a hedge fund manager? It is someone who gets paid an obscene amount of money for making other people obscene amounts of money.
All joking aside, the goal of hedge fund managers is to make as much money as possible for their investors with as little risk as possible. Their investors may be wealthy individuals, but they may also be pension funds and institutions that administer the retirement plans of everyday workers like teachers, firefighters and police officers.
Types of Hedge Fund Managers
There are many different types of hedge fund managers. Some make investment decisions based on fundamental analysis of companies or commodities. Others make decisions based on technical analysis or other quantitative models. Some engage in high frequency trading, while others hold investments for decades.
The only common thread is their compensation mechanism. Virtually all hedge fund managers charge fees based on the amount of profits that they generate for their investors. If they make their investor money, they get paid. If they don’t make money for their investors they do not get paid. This tends to align their interests a little closer to the interests of their investors.
Famous Hedge Fund Managers
George Soros is the manager who is perhaps best known for breaking the bank of england. He made a famous wager against the pound which was being supported by the BOE and the eventually the BOE ended up backing down. On the day that this happened, Soros ended up making a billion dollars. This was the biggest daily profit ever at that point in time.
John Paulson is another famous manager who made billions betting against subprime debt. He realized that the subprime debt was being traded for much more than it was worth, so he shorted it and made a killing.
David Tepper is best known for making $7B for his investors when coming out the 2008 credit crisis. He bought financial institutions when everyone else was selling them in a panic. Almost everyone thought that they were going bust, but Tepper disagreed and he was proven right. He made enormous profits when their stock prices turned around.
Top Hedge Fund Manager Pay
The pay of the best hedge fund manager runs into the billions. David Tepper made four billion dollars. This is such a staggering sum that it boggles the mind. Other top earners include George Soros, John Paulson and Jim Simmons. All of them also received billion dollar paydays. Soros made $3.3 billion, Simmons made $2.5 billion and Paulson made $2.4 billion. Not bad sums for a year’s work.