Hedge Fund Managers' Pay Roared Back Last Year

[Ernst Debets]

REPLY TO: D66 at nic.surfnet.nl

Cees,

Als je de Madoff manier bedoelt, ja dat klopt, maar dat zijn de jongetjes
die DENKEN dat ze slim zijn (ze zijn het niet echt, het zijn gewone
oplichters).
De echt slimme jongetjes zijn de "front runners" : voordat hun fund in een
bepaald aandeel stapt kopen ze privé hetzelfde aandeel, meestal gunstiger
dan het fund. Als beiden er aan verdienen is iedereen stil, je verdient er
immers aan. Gaat het fout dan is Leiden in last. Zowel voor de deelnemers in
het fund als de fundmanager die front running heeft gedaan. Dit type
oplichters vindt je vaak bij Hedgefunds (niet dat ik alle fundmanagers over
een kam wil scheren, er zitten genoeg integere mensen tussen).
Nu blijkt in de praktijk dat zowel front running als handel met voorkennis
moeilijk te bewijzen zijn. Dit is dus een "veiliger" manier van oplichten
dan de methode Madoff. Mijn stelliung is dus dat beide gevallen, zowel
Madoff als de "slimme" jongetjes die het geld op een andere manier
binnensluizen beiden onder de categorie oplichters vallen. 
Basis van alles is natuurlijk de enorme geldhonger, hoe meer je verdiend
hebt, hoe meer honger je krijgt naar nog meer geld. Tot op zekere hoogte
geldt dat voor iedereen. Ofwel: Geld maakt niet gelukkig, maar het maakt het
je wel makkelijk om ongelukkig te zijn.

Ernst Debets/
Zaanstad

-----Oorspronkelijk bericht-----
Van: owner-d66 at nic.surfnet.nl [mailto:owner-d66 at nic.surfnet.nl] Namens Cees
Binkhorst
Verzonden: donderdag 1 april 2010 9:42
Aan: Discussielijst over D66
Onderwerp: Hedge Fund Managers’ Pay Roared Back Last Year

REPLY TO: D66 at nic.surfnet.nl

Vervelend dat die mensen die er zo gigantisch aan verdienen, óók de 
mensen zijn die die omstandigheden kunnen scheppen.

Groet / Cees

PS. Als iemand een grote pot met geld beheert en die zo verdeelt dat een 
groot deel in zijn eigen beurs komt, wordt geprobeerd hem in de 
gevangenis te krijgen. De truuk is dus om hetzelfde te bereiken, maar 
dan een andere stroom geld in je eigen beurs te laten belanden. Dan ben 
je namelijk een van die slimme jongens (het zijn kennelijk allemaal 
jongetjes).

March 31, 2010
Hedge Fund Managers’ Pay Roared Back Last Year
http://www.nytimes.com/2010/04/01/business/01hedge.html
By NELSON D. SCHWARTZ and LOUISE STORY

The Lazarus-like recovery of the nation’s big banks did not benefit just 
the bankers — it also created huge paydays for hedge fund managers, 
including a record $4 billion gain in 2009 for one bold investor who bet 
big on the financial sector.

The manager, David Tepper, wagered that the government would not let the 
big banks fail, even as other investors fled financial shares amid fears 
that banks would collapse or be nationalized.

“We bet on the country’s revival,” Mr. Tepper, who describes his trading 
technique as a mix of deep analysis and common sense, said Wednesday in 
an interview. “Those who keep their heads while others are panicking 
usually do well.”

That strategy handed Mr. Tepper, a plain-spoken Pittsburgh native who 
first made his name at Goldman Sachs, the top spot on the annual ranking 
of top earners in the hedge fund industry by AR: Absolute Return+Alpha 
magazine, which comes out Thursday.

His investors did not do badly, either — Mr. Tepper’s flagship fund 
gained more than 130 percent last year.

The runner-up in the ranking was George Soros, the Hungarian émigré who 
has become better known in recent years for supporting Democratic 
candidates and making political headlines than for picking stocks. His 
fund, Quantum Endowment, grew 29 percent in 2009, earning Mr. Soros $3.3 
billion in fees and investment gains.

Hedge funds — the elite, lightly regulated investment vehicles open to a 
restricted range of investors — enjoyed a winning streak during the 
buyout boom that preceded the financial crisis in 2008. Then the bottom 
fell out of the industry, handing even top hedge funds double-digit 
percentage losses. In turn, the earnings of the top 25 fund managers in 
the 2008 survey tumbled 50 percent.

At the time, some market experts questioned whether the industry could 
continue to charge hefty fees — a manager typically receives a 
substantial portion of the fund’s annual appreciation — for such uneven 
performance. After all, hedge funds were supposed to protect investors 
against market volatility, not subject them to it.

But in a startling comeback, top hedge fund managers rode the 2009 stock 
market rally to record gains, with the highest-paid 25 earning a 
collective $25.3 billion, according to the survey, beating the old 2007 
high by a wide margin.

The minimum individual payout on the list was $350 million in 2009, a 
sign of how richly compensated top hedge fund managers have remained 
despite public outrage over the pay packages at big banks and brokerage 
firms.

Even so, big gains were not a constant among hedge funds last year. Many 
struggled to show gains, signaling a widening gulf between winners and 
losers, industry experts said.

“There are the haves and the have-nots,” said Sandy Gross, managing 
partner of Pinetum Partners, an executive recruiter for hedge funds. 
“These guys are the exceptions. You’re talking about the top people at 
top firms.”

The earnings figures reflect AR magazine’s estimation of each money 
manager’s portion of fees as well as the increased value of his personal 
stake in his fund.

For many of the top 25, the big personal gains in 2009 came after steep 
losses in 2008. Half of the top 10 managers in 2009 lost money the year 
before, including Mr. Tepper, whose flagship fund, Appaloosa Investment 
Fund I, dropped 27 percent in 2008.

Undaunted by that drop — and by the bankruptcy and liquidation of Lehman 
Brothers — Mr. Tepper loaded up on the preferred shares and bonds of the 
big banks in late 2008 and early 2009, correctly assuming that the 
government would not permit bigger institutions to fail.

It did not hurt that the Treasury Department was a fellow investor, 
buying preferred stock and warrants to help steady the faltering balance 
sheets of the banks. The government has since sold many of its bank 
stakes at a considerable profit.

Mr. Tepper, who manages about $12 billion for investors, also benefited 
from a successful investment in bonds of American International Group, 
the giant insurance company that was also rescued by the government.

In retrospect, investing in major banks might not seem so risky, but Jim 
McKee, a hedge fund researcher for the consulting firm Callan 
Associates, said it was a tougher call to make than simply buying up 
distressed mortgage bonds, which Mr. Tepper did in addition to buying 
bank debt.

At the time, Mr. McKee said, “it was questionable whether the banks 
would be around. That was definitely a braver bet.”

Besides Mr. Tepper, the losers turned winners in 2009 included Steven 
Cohen (No. 5), Edward Lampert (No. 7), Kenneth Griffin, (No. 8) and 
Philip Falcone (No. 10).

Mr. Griffin enjoyed an especially sharp turnaround, earning $900 million 
as his flagship funds jumped 62 percent in 2009, compared with a 55 
percent plunge in 2008.

A spokeswoman for Mr. Griffin declined to comment.

Three managers among the top 10 — Mr. Soros (No. 2), James Simons (No. 
3) and John Paulson (No. 4) — were back-to-back winners, having profited 
during the lean times of 2008 as well as in the booming market of 2009.

Mr. Paulson attracted fame for betting against subprime mortgages at a 
time when many of his rivals had not even heard of the now notorious 
class of assets. That secured him the No. 1 spot in 2007, when he earned 
$3.7 billion, the biggest annual take for a hedge fund manager until Mr. 
Tepper eclipsed him last year.

Mr. Paulson was an especially adroit trader, making huge profits on bets 
against bank stocks in 2008 and then buying them back after they were 
beaten down.

A spokesman for Mr. Paulson said he was not available to comment.

This year it will probably be harder to achieve the kind of outsize 
returns enjoyed by Mr. Paulson in 2007 and Mr. Tepper in 2009, given the 
recent run-up in both stocks and bonds.

“Last year, there was a great opportunity in debt. It was very, very 
undervalued,” said Carl C. Icahn, the legendary investor known for his 
aggressive corporate takeovers, who ranked No. 6 on the list with a 
personal gain of $1.3 billion. “Today, it’s fully valued. There are 
still great opportunities in bankrupt companies, but dealing with 
bankruptcies is an arcane art and much more complicated than simply 
buying distressed debt.”

Finding new opportunities is not the only challenge facing even the most 
successful hedge fund managers. In Congress, there is growing pressure 
to treat some earnings of hedge fund managers as income instead of 
capital gains, which are taxed at a lower rate.

Nevertheless, running a hedge fund will remain the best way for aspiring 
stock-pickers to make billions on Wall Street, even if they will have to 
hand over more of their profits to Uncle Sam.

“It’s certainly not going to drive them to some other field,” Mr. McKee 
said.

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