Hedge fund pay soars - but 2010 could be tougher

The biggest hedge fund whales are collecting riches as never before, despite CEO pay falling in 2009 - the first time in two decades that remuneration has declined for two consecutive years.

At the top of the league of earners last year, according to a review of executive pay in the New York Times, was David Tepper, who as previously reported in The First Post bet that the US government would not let the big banks fail or be nationalised - and won. "We bet on the country's revival," Tepper (above), who made $4bn, told the New York Times yesterday. "Those who keep their heads while others are panicking usually do well."

Second-placed was George Soros, whose Quantum Endowment fund grew 29 per cent in 2009, earning the Hungarian emigre $3.3bn. In at No 3, the same as last year, was James Simons, the multi-billionaire mathematician whose Renaissance fund uses computers to predict price changes in easily-traded financial instruments. At No 4 is John Paulson who famously made $2bn in 2008 betting against subprime mortgages.

Art-collector Steven Cohen comes in at No 5; corporate raider Carl C. Icahn is at No 6 with a $1.3bn pay award; Sears investor Edward Lampert is seventh; bond trader Kenneth Griffin, 41, comes in at No 8 and Philip Falcone, whose pet pot-bellied pig named 'Pickles' has its own room in his Manhattan townhouse, scrapes in at No 10.

In a startling comeback after record losses and pay reductions of 50 per cent or more in 2008, top hedge fund managers last year rode the 2009 stock market rally to record gains. It was, some say, hard to lose. The highest-earning 25 earned a collective $25.3bn, according to the New York Times, beating the boom year of 2007 by a wide margin. No one on the list earned less than $350m.

Still, hedge fund analysts say the free-swimming whales are the exception: dramatically rising pay packages are not the norm further down the hedge fund food chain. "There are the haves and the have-nots," said Sandy Gross, managing partner of Pinetum Partners, an executive recruiter for hedge funds. "These guys are the exceptions. You're talking about the top people at top firms."

So what about 2010? Market analysts say such huge profits will be hard to repeat given the essentially static valuations on the stock and bond markets. "Last year, there was a great opportunity in debt. It was very, very undervalued," Icahn told the Times.

"Today, it's fully valued. There are still great opportunities in bankrupt companies, but dealing with bankruptcies is an arcane art and much more complicated than simply buying distressed debt." ·