Do you think you are well paid? Then read on. The hedgehogs have raised the bar for executive compensation to unheard of heights. The the top 25 hedge fund managers in the world collectively earned an eye-popping $25 billion, according to Alpha magazine. That is more than the GDP of many small countries. Three lucky souls took home more than a billion dollars a year. The legendary George Soros just fell short.
Most of the global debate on executive compensation has resolutely focused on the pay packets of company bosses. What they earn is modest stuff compared to the loot the top hedge fund managers take home.
One reason hedge fund managers earn well is that they get paid 2% to manage a fund and a 20% share in its profits—which is many times what a traditional fund manager gets. The hedge fund guys, in turn, promise to beat the market—or deliver alpha, to use their own lingo. The issue is: is alpha so expensive to deliver?