Think CEOs Are Overpaid? These Guys Make a Lot More

Photo (cc) by LendingMemo

The year 2013 was a great time to be a hedge fund manager.

According to an annual ranking by Institutional Investor’s Alpha magazine, the top 25 highest-earning hedge fund managers in the U.S. were paid a mind-boggling total of $21.15 billion last year.

Pick up your jaw and prepare for it to drop again after you read this little nugget from The New York Times:

They earned that hefty sum in a year when most hedge fund managers fell short of the market’s returns. The multibillion-dollar payday is the highest since 2010, and it is 50 percent more than in 2012, according to the survey.

So, just so we’re all on the same page: Even though many hedge funds underperformed the stock market last year, hedge fund managers still managed to bring home the multibillion-dollar bacon. In comparison, CEOs of large U.S. companies received, on average, $12.3 million in compensation in 2012.

At the top of the super-rich list is David Tepper of Appaloosa Management. His paycheck totaled $3.5 billion in 2013 after bringing in a “meager” $2.2 billion in 2012. To be fair, Tepper did have a decent year and his investors were likely happy with his work. “With a 42 percent return, Tepper beat the Standard & Poor’s 500-stock index,” Bloomberg said.

Steven Cohen of SAC Capital Advisors came in second to Tepper, earning $2.4 billion in 2013. But he won’t be making the list again. His firm pleaded guilty to charges stemming from insider trading and agreed to pay $1.8 billion in penalties. CNN Money said:

His firm, which renamed itself Point72 in the wake of its conviction, is no longer allowed to manage money for other investors. Instead, the firm now operates as a “family office,” which means it only invests on behalf of Cohen and his employees. With $9.2 billion in assets, it’s still considered a formidable force on Wall Street.

So how are hedge fund managers’ paychecks determined? The Times said:

The size of these paychecks are estimates based on the value of the managers’ stakes in their hedge funds and the fees they charge. Investors typically pay management fees of 2 percent of the total assets under management and 20 percent of the profits, or “2 and 20.”

Many hedge fund managers also invest their own money in their funds, Bloomberg said.

If you think the multibillion-dollar paychecks for hedge fund managers are bad, consider this: The Center for Effective Government says:

Hedge fund managers continue to take advantage of a very costly loophole called carried interest. This loophole allows their gargantuan pay packages to be taxed at 23.8 percent (a 20 percent capital gains tax, plus a 3.8 percent surtax to help fund Medicare) rather than the 43.4 percent tax (39.6 percent income tax rate plus 3.8 percent Medicare tax) if these earnings were taxed as wages.

It will be interesting to see how many zeroes are on hedge fund managers’ paychecks for 2014, especially considering that hedge funds just posted their worst first-quarter results since 2008, according to Bloomberg.

In my next life, I’d like to come back as a hedge fund manager. Even when your work isn’t great, you still rake in the unbelievably big bucks.

What do you think of the paychecks of the top 25 hedge fund managers? Share your thoughts below or on our Facebook page.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
Watch This: Organize Your Home With Dollar Tree Products
Watch This: Organize Your Home With Dollar Tree Products

Here’s how to organize every corner of your home using only items from a dollar store.

3 Reasons You Can’t Rely on Medicare Alone
3 Reasons You Can’t Rely on Medicare Alone

Counting on Medicare to cover health care costs can jeopardize your retirement plans.

3 Bank Accounts With Perks for Customers Age 55 and Older
3 Bank Accounts With Perks for Customers Age 55 and Older

These checking accounts offer exclusive discounts and other perks — including interest — to older customers.

Retirees Can Dodge Taxes on These 9 Types of Income
Retirees Can Dodge Taxes on These 9 Types of Income

There are lots of things Uncle Sam can’t touch — so long as you play by the rules.

8 Amazon Picks Under $30 for Coffee Lovers
8 Amazon Picks Under $30 for Coffee Lovers

We’ve brewed up a list of amazing Amazon products that are sure to perk you up.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
9 Things You’ll Never See at Costco Again
9 Things You’ll Never See at Costco Again

The warehouse store offers an enormous selection, but these products aren’t coming back.

11 Things Retirees Should Always Buy at Costco
11 Things Retirees Should Always Buy at Costco

This leader in bulk shopping is a great place to find discounts in the fixed-income years.

Over 50? The CDC Says You Need These 4 Vaccines
Over 50? The CDC Says You Need These 4 Vaccines

Fall is the time to schedule vaccines that can keep you healthy — and even save your life.

11 Senior Discounts for Anyone Age 55 or Older
11 Senior Discounts for Anyone Age 55 or Older

There is no need to wait until you’re 65 to take advantage of so-called “senior” discounts.

11 Household Items That Go Bad — or Become Dangerous
11 Household Items That Go Bad — or Become Dangerous

When you get the impulse to stockpile these everyday items, pay close attention to their expiration dates.

8 Things You Can Get for Free at Pharmacies
8 Things You Can Get for Free at Pharmacies

In this age of higher-priced drugs and complex health care systems, a trip to the pharmacy can spark worry. Freebies sure do help.

These Are the 4 Best Medicare Advantage Plans for 2020
These Are the 4 Best Medicare Advantage Plans for 2020

Medicare Advantage customers themselves rate these plans highest.

7 Ways to Boost Your Credit Score Fast
7 Ways to Boost Your Credit Score Fast

Your financial security might soon depend upon the strength of your credit score.

The 10 Most Commonly Stolen Vehicles in America
The 10 Most Commonly Stolen Vehicles in America

A new model parks atop the list of vehicles that thieves love to pilfer.

19 High-Paying Jobs You Can Get With a 2-Year Degree
19 High-Paying Jobs You Can Get With a 2-Year Degree

These jobs pay more than the typical job in the U.S. — and no bachelor’s degree is required.

5 Ways to Get Amazon Prime for Free
5 Ways to Get Amazon Prime for Free

Hesitant to drop $119 a year on an Amazon Prime membership? Here’s how to get it for free.

10 Reasons Why You Should Actually Retire at 62
10 Reasons Why You Should Actually Retire at 62

If you can, here are several good reasons to retire earlier than we’re told to.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

26 States That Do Not Tax Social Security Income
26 States That Do Not Tax Social Security Income

These states won’t tax any of your Social Security income — and in some cases, other types of retirement income.

14 Things That Are ‘Free’ With Medicare
14 Things That Are ‘Free’ With Medicare

These services could save you money and help prevent costly health problems.

5 Keys to Making Your Car Last for 200,000 Miles
5 Keys to Making Your Car Last for 200,000 Miles

Pushing your car to 200,000 miles — and beyond — can save you piles of cash. Here’s how to get there.

5 Things That Make Life More Meaningful for Retirees
5 Things That Make Life More Meaningful for Retirees

Retirees agree: These are the things that give them purpose and fulfillment in their golden years.

10 Things You Should Never Do With Bleach
10 Things You Should Never Do With Bleach

Does the pandemic have you reaching for bleach more than ever before? Learn the ins and outs of using this powerful disinfectant.

15 Amazon Purchases That We Are Loving Right Now
15 Amazon Purchases That We Are Loving Right Now

These practical products make everyday life a little easier.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.