Ken Griffin, the founder of the Chicago-based Citadel hedge
fund that recently hired former US Federal Reserve chairman Ben Bernanke as an
adviser, came top of the list for 2014, taking home $1.3bn.
James Simons, the septuagenarian mathematician and code
breaker whose Renaissance Technologies has been one of the best preforming
hedge funds over three decades, came in at number two on the list, earning
$1.2bn.
Ray Dalio, founder of Bridgewater, the world’s largest hedge
fund by assets, was placed third with earnings of $1.1bn.
Bill Ackman, who has been waging an aggressive battle
against the US company Herbalife, was ranked fourth with a $950m pay packet.
Hedge funds typically adopt a fee structure known as “two
and 20”, or 2 per cent of all assets under management and 20 per cent of
profits. This allows managers to earn large sums regardless of their fund’s
performance based on the amounts of assets they manage, as well as taking a
fifth of any investment gains they make. The average hedge fund returned about
3 per cent in 2014, 9 per cent in 2013, and 6 per cent in 2012. A small but
influential group of public pension funds who have spoken out against the
industry’s high costs and lacklustre investment performance in recent years.
In January, Europe’s second-largest public pension fund axed
its entire €4bn hedge fund portfolio after it was left disappointed by its cost,
complexity and low returns. The fund, Holland’s €156bn Dutch healthcare
workers’ pension fund PFZW, took the rare step of directly attacking the high
pay of hedge fund managers, criticising “the high remuneration in the hedge
fund sector and the often limited concern for society and the environment”. Last
year Calpers, the largest US state pension fund, said it was pulling out of its
hedge fund investments, arguing that its $4bn portfolio was no longer
appropriate for its investment aims.
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