Hedge fund, Hog heaven

Once again, this humble blogger's day has begun with a reminder that he missed his calling.  Seems a handful of hedge fund traders are now pulling billion-dollar salaries, according to an annual survey by Trader Monthly magazine:

The top five hedge fund managers earned 10-digit packages in 2006 while 93 other traders banked an average of 241 million dollars, the Trader Monthly survey found.

"Compensation for hedge fund managers has exploded as more investors have invested in hedge funds," observed Rea Hederman, an economics expert and senior policy analyst at The Heritage Foundation.

Hederman said investors do not seem to mind the huge salaries taken by managers of funds that perform well, but said some "hedge funds have not delivered the returns that the investors might have wanted."

Gee, that's something DR readers have known for some time now.  But we like it when we're vindicated in the mainstream media regardless:

In 2006, the average hedge fund return to investors was 11.99 percent, according to the HedgeFund.net website while the broad-market Standard and Poor's 500 index posted a gain of 13.62 percent, according to Thomson Financial.

Some market observers fear too many investors are piling into hedge funds chasing a gold rush that could fuel a market collapse.

"This is only one more indicator of how far the bubble has expanded, how investors have rushed into hedge funds and private equity and other equity products," said Alan Johnson, a director of Johnson Associates.

"It's exactly reminiscent of the tech bubble of the late 1990s, early 2000s. To some degree, it's madness," Johnson said, adding "we believe the bubble is going to burst at some point."

For the record, the top spot in the Trader Monthly survey goes to John Arnold, 33, who has clearly recovered from whatever setback he might have suffered working for Enron by pulling down up to $2 billion last year running Centaurus Energy fund — making the smart bets on natural gas that the folks at Amaranth did not.  Nice work if you can get it.

The Daily Reckoning