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Pay for Top-Earning U.S. Hedge Fund Managers Falls 35%, AR Says

Bridgewater Associates Founder Raymond Hwang
Raymond "Ray" Dalio, president and founder of Bridgewater Associates LP, during the World Economic Forum (WEF) in Davos, Switzerland, on Jan. 25, 2012. Photographer: Chris Ratcliffe/Bloomberg

Compensation for the highest-paid U.S. hedge-fund managers plunged 35 percent in 2011 to $14.4 billion after the European sovereign debt crisis pushed the industry to its second-worst year ever, a survey showed.

Average pay for the 25 top earners was $576 million last year, down from $883 million in 2010, according to an annual ranking published by AR Magazine. In 2009, the figure stood at $1.1 billion.

Ray Dalio, chief investment officer of Westport, Connecticut-based Bridgewater Associates LP, topped the list with $3.9 billion as his biggest pool, Pure Alpha, gained 16 percent, AR Magazine said. John Paulson, whose $4.9 billion of pay made him the highest-paid hedge fund manager in 2010, fell off AR’s list for 2011. His New York-based Paulson & Co. posted a record 51 percent loss in one of its biggest funds last year.

Hedge funds posted an average decline of 5.3 percent last year, a negative annual performance exceeded only by the 19 percent drop in 2008, according to Hedge Fund Research Inc. Concern Greece would fail to restructure its debt and that the U.S. would slip back into recession fueled market volatility.

Bridgewater, which manages $70 billion of hedge fund assets, uses a macro strategy to try to profit from economic trends. It profited last year by predicting global economic headwinds would trigger a flight by other investors to safer assets such as U.S. Treasuries and German bunds. Dalio, 62, has earned $8 billion over the past two years, AR Magazine said.

Icahn, Simons

Second on the list was billionaire investor Carl Icahn, 76, of Icahn Capital LP, who made $2.5 billion last year, according to the magazine. Icahn, who returned all outside money in his hedge funds to clients last April, profited from his investment in El Paso Corp. after Kinder Morgan Inc. agreed to buy the natural-gas pipeline company.

Jim Simons, 73, of Renaissance Technologies Corp. in East Setauket, New York, ranked third after earning $2.1 billion in 2011, according to AR Magazine.

Eleven hedge fund managers were placed on the AR Magazine list of 25 highest earners even though their firms posted single-digit investment returns. The publication attributed this to managers benefitting from fees charged to investors and to managers putting their own assets in their hedge funds.

Steve Cohen, founder of Stamford, Connecticut-based SAC Capital Advisors LP, earned $585 million after his main hedge fund gained 8 percent and Paul Tudor Jones made $175 million after his main fund rose 3 percent, the magazine said.

The following table shows the highest-paid U.S. hedge-fund managers, according to the report:

     Person                   Firm                2011 estimate

1. Ray Dalio             Bridgewater Associates   $3.9 billion
2. Carl Icahn            Icahn Capital Management $2.5 billion
3. James Simons          Renaissance Technologies $2.1 billion
4. Kenneth Griffin       Citadel LLC              $700 million
5. Steven Cohen          SAC Capital Advisors     $585 million
6. Chase Coleman         Tiger Global Management  $550 million

Source: AR magazine

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