A volatile year for hedge funds makes for a volatile year for hedge fund compensation—especially at the top.
No one will cry for the 25 hedge fund managers who earned the most money last year. As a group, they took home $14.4 billion, an average of $576 million apiece. And the lowest-earning among them made $100 million in 2011.
But those numbers are a big step down from 2010, when the top 25 made $22.07 billion, or an average of $882.8 million each. Just three managers earned more than $1 billion in 2011, compared to six in 2010 and seven in 2009. And the $100 million minimum for 2011's Rich List from AR magazine is the lowest in four years.
Of course, the 2011 and 2010 lists bear almost no resemblance to one another. The previous year's biggest earner, John Paulson, who made almost $5 billion in 2010, had the worst year of his career and fell off the list entirely. He wasn't alone: Fifteen of 2010's top 25 didn't make the 2011 list, including Appaloosa Management's David Tepper (4th in 2010 with $2.2 billion in earnings) and ESL Investments' Edward Lampert (6th in 2010 with $1.1 billion in earnings).
In Paulson's place is last year's number two, Bridgewater Associates' Ray Dalio, who made $3.9 billion last year, $800 million more than he took home in 2010. Dalio has skyrocketed through the AR list in the past two years, having earned less than $1 billion in 2009.
Newly-retired Carl Icahn jumped from seventh place to second with $2.5 billion in earnings, almost three times his 2010 take-home. AR said that Icahn's 34.5% return before fees put him on the list, despite the fact that he returned outside money to investors in the first half of last year.
James Simons, of Renaissance Technologies, held onto third place with $2.1 billion in earnings. Citadel Investment Group's Kenneth Griffin crashed the top 10, leaping into fourth place with $700 million as his firm's flagships crested their high-water marks last year. SAC Capital Advisors' Steven Cohen held steady at fifth place, even though his earnings plummeted from $1.3 billion in 2010 to $585 million last year, and Tiger Global Management's Chase Coleman, whose fund rose 45% last year, jumped into sixth place with $550 million in earnings.
Eight hedge fund managers made their first appearance on the list, and given the correlation between hedge fund performance and size and the Rich List, it's not surprising that two of them are Dalio's deputies at the biggest hedge fund in the world, Bridgewater, Greg Jensen and Robert Prince. Elliott Management's Paul Singer also made his debut on the Rich List in 2011.
"Hedge fund managers are paid high fees to deliver positive absolute returns, regardless of the direction of the markets," Michael Peltz, editor of AR and Institutional Investor, said. "In 2011, the majority of managers failed to do that."