Salary of Hedge Fund Managers
Hedge fund managers oversee some of the most lucrative investment accounts in the United States. These financial minds are in charge of millions of dollars with the primary concern being to turn those millions into even more millions. The annual salaries and bonuses for these professionals can skyrocket into the billions of dollars.
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What is a Hedge Fund?
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A hedge fund is a form of flexible investment company which services a small number of high-end investors. The fund itself is a collection of stocks, commodities and other investments created by a hedge fund team. Investors devote large sums of money to the fund, routinely in excess of $1 million, trusting the skill of the hedge fund team to generate a large return on the initial investment. A hedge fund can sometimes use risky stock practices which leads to a feast-or-famine type scenario -- either the investor gets richer or loses quite a bit of money. This is why good hedge fund managers earn such high salaries.
The Hedge Fund Team
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According to the Careers in Finance website, there are actually several managers working on any given hedge fund. The fund head, senior portfolio manager and junior portfolio manager all work in supervisory capacities to manage the fund and ensure that it grows. The median salary for a fund head was $200,000 in 2008. The median salary of a senior portfolio manager was slightly less at $175,000 in 2008, and a junior portfolio manager earned an average annual income of $150,000 in that same year.
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Bonuses
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A hedge fund manager's bonus for successful growth of the fund can drastically improve his annual salary. According to the Careers in Finance website, the average yearly bonus for a fund head in 2008 was $1,000,000. There is a substantial drop-off in bonus pay for senior and junior portfolio managers at $325,000 and $300,000. It should be noted that even though the bonuses for senior and junior portfolio managers was lower than the fund head, it still represented a near double salary increase.
The Top Earners
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The top hedge fund managers earn incomes that far exceed any other position in finance. According to the New York Times, hedge fund manager David Tepper earned an annual income of more than $4 billion in 2009. Tepper wagered the government would not allow banks to fail during the 2008 to 2009 mortgage crisis and tailored his fund investments accordingly. As a result, his flagship fund gained 130 percent in 2009.
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