NEW YORK — Wall Street’s elite club of hedge fund managers got a bit richer last year, according to an annual ranking published this week. The top two hedge fund managers made US$1.7 billion each in 2015, and the top 25 averaged 10 per cent more than last year.
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The rankings, issued by Institutional Investor’s Alpha magazine, offer a rare peek inside the world of hedge fund managers, who can make massive bets on stocks or bonds and walk away with billions in profits. The top five hedge fund managers made more than US$1 billion each last year. The top 25 hedge fund managers made a combined US$12.94 billion, according to Institutional Investor’s Alpha magazine. Among the top 25 hedge fund managers, the average pay was US$517.6 million. Only one woman ranked among the 50 highest-paid executives.
That puts the leaders of the hedge fund industry, a secretive and lightly regulated group, well ahead of banking executives, who have been put under greater scrutiny since the 2008 financial crisis. Jamie Dimon, chief executive of the largest bank in the country, JPMorgan Chase, made a relatively measly US$25 million last year by comparison. Another frequent target of Wall Street critics, Lloyd Blankfein, the chief executive of Goldman Sachs, made US$23 million in 2015.
Meanwhile, the hedge fund industry has doubled in size over the past decade, and executives are bringing in high pay despite weathering a tough year in the financial markets. Dan Loeb, the head of Third Point, a large and well-known hedge fund, said in a letter to investors last month that the industry is in the “first innings of a washout.” Five hedge fund managers made enough to rank among the industry’s highest paid despite losing money in at least one of their funds in 2015, according to Institutional Investor.
The industry is a frequent target of critics who say the world’s wealthiest financiers are benefiting from a broken U.S. tax code. Hedge fund managers’ profits are treated as long-term capital gains, which means they’re taxed at no more than 15 per cent. Critics say those earnings should be taxed as ordinary income, or as much as 39.6 per cent. Even Republican presidential candidate Donald Trump has called for an end to the discrepancy, saying “hedge fund guys are getting away with murder.”