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Excerpts taken from Trader Monthly magazine (US edition)
http://www.trade2win.com/knowledge/magazines/printed/trader-monthly/
The Trader Monthly 100: Earn, Baby, Earn
Our third annual take on the world's highest-earning traders.
By: Rich Blake , A.D. Barber , Robert LaFranco
Issue: April/May 2006 , Page 69
If you're raking it in, there's a good chance you're making it in.
When Trader Monthly set out, in the summer of 2004, to cover the superstars of the investment world the way Rolling Stone covers rock stars and Forbes covers billionaires, we knew our list of the world's highest-paid traders might create a stir. And this year's list -- the third installment, based on 2005 performance -- is a bombshell.
Not only did each of our top two earners, T. Boone Pickens and Stevie Cohen, score estimated compensation figures north of $1 billion -- a first -- but this time, even the low-rent hedgehogs needed $40 million to make the cut. And to think conventional wisdom holds that hedge-fund managers underperformed last year. Hardly.
On Wall Street, some of the scores were gargantuan, as bulge-bracket banks enjoyed one of the most profitable years in the history of the markets, from asset-backed to credit and crude to crack spreads.
Speaking of energy, down at the NYMEX, we've uncovered a crop of red-hot traders -- some you may have heard of and others you might not know. In all, we've turned over more stones and worked longer and more aggressively to scrub, cajole and browbeat to get our estimates literally right on the money. We're confident this effort paid off. Trust us: You're in store for a detailed snapshot of who's making waves in the trading world.
Now, then -- on with the countdown...
When Trader Monthly's inaugural list of the top-earning traders appeared -- it was published in our premiere issue in November 2004 and based on 2003 compensation -- it got a lot of attention. We viewed it, however, as more of a starting point -- a first step toward the definitive accounting of who has the greatest effect on the financial markets.
Last year's list was an improvement, though we overshot on some (Wall Streeters Aziz Nahas and Angie Long) and underestimated others, particularly on the hedge-fund side (our figure for Eddie Lampert, for example, was quite low).
This year, we put inside information from our readers to greater use. We tried to do even more due diligence, ask more questions, consult more sources and generally be more proactive in getting these tight-lipped titans to talk to us. In short, we tried still harder.
Admittedly, apart from tapping high-placed sources within the IRS, nobody can pin these guys down with precision. However, by doing exhaustive interviews (with traders, finance-industry executives, former executives, friends, back-office staffers and headhunters) and scouring all available data (SEC filings, litigation filings, news articles, corporate Web sites, performance databases and comp-consultant reports), we feel our ranges are getting damn close.
One nagging question comes up a lot: Who is a trader?
For instance, would a portfolio manager merit inclusion on a list of traders? It's a philosophical conundrum, but we're less concerned with what your business card says and more preoccupied with our mission: covering the heavyweight champions of the investment world (that means you, Mr. Hedge Fund PM). Sure, we lean toward the true traders -- active, rapid-fire investors -- but activists, net longers, longer-termers: If you're raking it in, there's a good chance you're making it in.
We put 60 hedge-fund guys on this year's list, reserving 40 slots for more traditional bank and independent traders. In other words, we're keeping an open tent so the whole list isn't simply hedgies.
While hedge-fund performance numbers aren't always available to the public, they are widely known on the Street. We have a good idea of how each fund did and what its profits were, though extrapolating compensation of the individual or individuals responsible for those profits is the final and least scientific part of the process. Some guys stay lean on expenses and take the lion's share of the profits for themselves, while others share the wealth.
Some have large commitments to third-party marketing firms that eat into profits, while others have seen their personal ownership in the fund compound through successive years in which high performance numbers have created profits on investment that dwarf incentive and managment fees. In the end, reporting yielded some answers.
We called everyone on the Trader Monthly 100 prior to publication. Some confirmed our estimates; others tried to spin us higher or lower; still others refused to comment. Inevitably, there will be mistakes, omissions and exaggerations, but based on the tremendouse amount of feedback we're received from our subjects and our readers, we're confident that our process has improved dramatically over the course of the first two installments of the Trader Monthly 100 -- and we'll continue to strive for improvement in the future. That's our long-term position.
If you have feedback, we're listening -- please share it with senior editor Rich Blake at [email protected]
Trader Monthly 100: The Top 10
The highest-earning traders of 2005.
By: Rich Blake , A.D. Barber , Robert LaFranco
Issue: April/May 2006 , Page 69
Triple-digit returns off a 10-digit asset base that includes an oversized dose of his own money translates into what Trader Monthly believes is the largest one-year sum ever earned.
RANK: 1
T. Boone Pickens
CITY: Dallas
FIRM: BP Capital
AGE: 77
"Long crude" doesn't even begin to describe T. Boone Pickens's position. With $5 billion and growing in assets under management, his fund company, BP Capital, is throwing off a small national economy via an unshakable bet that the world's oil supply can't keep up with rising demand.
"Yes, my own money is in there," Pickens told Trader Monthly in January, describing his operation. "That always impresses the other investors."
And what's not to be impressed with? Returns on Pickens's main commodities pool were over 700 percent in 2005. His smaller equity fund was up more than 100 percent. While Pickens may not be heavily involved in trading on a day-to-day basis (the funds overall actually trade very little), his market view -- and oft-televised table thumping -- is what has driven BP's long-term strategy since oil was $20 a barrel.
When he's not out hyping the possibility of triple-digit crude prices or helping sink Democratic presidential hopefuls, Pickens donates money to pet rescue. Recently, he caught some flak when, as part of a tax loophole, he gave $165 million to Oklahoma State and the money ended up in his hedge fund. It's not a bad place to park a pile of dough, of course: Triple-digit returns off a 10-digit asset base that includes an oversized dose of his own money translates into what Trader Monthly believes is the largest one-year sum ever earned (in contrast to a Bill Gates–style appreciation in net worth), larger even than Michael Milken's legendary $550 million haul of 1986, adjusted for inflation.
ESTIMATED INCOME: $1.5 BILLION+
RANK: 2
Stevie Cohen
CITY: Stamford, Connecticut
FIRM: SAC Capital Advisors
AGE: 49
The man is called "Stevie," as if he were everybody's favorite soul singer or the neighborhood paperboy, yet he could very well be the richest trader who ever laid down a position. Either way, Cohen is certainly among the most admired living financial figures, second only perhaps to Alan Greenspan (who might end up working for Cohen, at the rate Cohen gobbles up market studs). Says one former SAC staffer: "Stevie has the most clout on the Street, the best contacts, an army of analysts and unlimited capital." A graduate of the University of Pennsylvania's Wharton School who got started in the late 1970s as a proprietary trader at Gruntal & Co., Cohen launched SAC in 1992 with $20 million. He has since amassed more than $7 billion that he personally runs -- not to mention 500 or so traders, analysts and support staff, creating an asset-management empire that spans two management companies (SAC Capital Advisors and SAC Capital Management), three main funds (SAC Capital Associates, SAC Capital International and SAC Global Diversified), two separate offices in Stamford and additional outposts in Manhattan, London and San Francisco. When Cohen comes upon a trader with exceptional skills, he'll seed him in-house -- or help put him in business on his own.
The SAC family had another impressive year in 2005 -- performance, for the most part, was 20 percent–plus, as it has been, amazingly, just about every year since Cohen began. With his incentive fee of up to 50 percent of total profits (though his newest fund, the SAC Multi-Strategy, is said to be 3-and-35, and we hear the rest of his vehicles going forward will follow suit), perhaps only a federal mint prints more money year in, year out than Cohen. Had it not been for an anomalous rough patch this past October (his only down month), his epic compensation amount might have been even greater. We figure the SAC empire took in revenues of at least $3 billion last year -- and if Cohen, conservatively, took one-third...
ESTIMATED INCOME: $1 BILLION+
RANK: 3
James Simons
CITY: East Setauket, New York
FIRM: Renaissance Technologies Corp.
AGE: 67
Jim Simons is a Euclid for our times: He has a Ph.D. in math from Berkeley, has won the prestigious Veblen Prize in geometry, taught at MIT and founded Math for America. Well, here are some numbers: $6 billion, as in Simon's assets under management at year end. Or how about 5-and-44, his notoriously stiff fee arrangement? Then, of course, there's $100 billion, the lofty target Simons has set for a net-long vehicle his firm recently started. Finally, there's the 28 percent return produced by his Medallion fund, which employs scientific models to predict price movements in commodities, currencies and equities.
"Certain price patterns are non-random," the former code-breaker cryptically told The New York Times in a rare interview last November. He could be on to something: After all, Medallion has averaged more than 30 percent, net of fees, every year over the past decade and a half -- or three times as much as the S&P 500 index over the same period.
Simons's hundreds of millions of dollars in charitable donations support everything from autism research to augmenting inner-city math teachers' salaries to atom-smashing Big Bang replication experiments at the Brookhaven National Lab.
ESTIMATED INCOME: $900 MILLION – $1 BILLION
RANK: 4
Paul Tudor Jones
CITY: Greenwich, Connecticut
FIRM: Tudor Investment Corp.
AGE: 51
As the long, hot summer of 2005 wore on, the flagship fund that anchors Paul Tudor Jones's roughly $14 billion hedge-fund empire was hardly sizzling. Reports were surfacing that like a lot of funds, it had suffered losses in May and -- gasp! -- was actually down 2 percent at mid-year. But never bet against a master. Jones staged a comeback, all right: His flagship fund (with assets of $2 billion) finished the year up roughly 14 percent, an improvement over the 12 percent return registered a year earlier.
Much of this commodities superstar's personal earnings have been plowed back into his funds over the years; thus it's astounding to speculate what he might actually be taking home. We attempted to err on the conservative side, because Jones has a reputation for paying his people extremely well. But, based on what we believe is at least a sizable personal stake, Jones's 2005 take had to be among his most enormous yet -- which is why he was able to do such things as back Harvey and Bob Weinstein's new media group, swap thousands of acres of pristine Colorado land with the federal government and help bankroll construction of a new 15,000-seat arena for the University of Virginia, his alma mater. It'll be called John Paul Jones Arena -- named after Jones's father, by the way, not the Revolutionary War naval hero.
ESTIMATED INCOME: $800 – $900 MILLION
RANK: 5 (TIED)
Stephen Feinberg
CITY: New York
FIRM: Cerberus Capital Management
AGE: 46
Known as the king of the vultures, Cerberus has some $16 billion in assets -- almost double its 2003 figure. Feinberg, who began at Drexel, personally runs around $4 billion, a portfolio that logged a 15 percent return after fees. He began in 1992 with just $10 million. Among some of his investors, according to media reports, have been Secretary of Defense Donald Rumsfeld and hedge-fund pioneer Michael Steinhardt. When the buyout world meets the hedge-fund world, a three-headed beast of giant deals, controversy and hefty returns usually emerges.
ESTIMATED INCOME: $500 - $600 MILLION
RANK: 5 (TIED)
Bruce Kovner
CITY: New York
FIRM: Caxton Associates
AGE: 61
Bruce Kovner's roughly $7 billion flagship fund once again generated high-single-digit returns last year, which is starting to become a trend for the once unstoppable commodities/macro titan. Nevertheless, his Caxton Global Investments still generated some staggering absolute returns -- at least $500 million. Next, take into account his other funds, some of which had pretty good years (the $350 million Caxton Alpha Equity, which Kovner comanages, for example, completed its first full year up 15 percent). Finally, consider that a lot of Kovner's own money is in the fund, and even by neo-conservative estimates it's clear the man is breathing some rarefied air.
Chairman of the board at the Juilliard School of Music -- he recently gave it one of the world's greatest music-manuscript collections -- he reportedly installed a soundproof music room in his Upper East Side townhouse so he could pound on a Steinway grand piano at night and not bother the neighbors. A staunch Republican, chairman of the American Enterprise Institute and backer, with Michael Steinhardt, of the New York Sun newspaper, Kovner has come a long way from trading soybean futures in his own account.
ESTIMATED INCOME: $500 – $600 MILLION
RANK: 5 (TIED)
Eddie Lampert
CITY: Greenwich, Connecticut
FIRM: ESL Investments
AGE: 43
Three years after a terrifying kidnapping and fresh off his Kmart coup, Lampert has the investment world at his command and some $15 billion under management. A value investor in the mold of Warren Buffett, he didn't have a 300 percent return on his Kmart position like last year; two of his two big long-term plays, Sears and AutoNation, were each up around 15 percent -- still not bad compared to the low-single-digit U.S. equity benchmarks. The man Richard Rainwater recently called "the greatest investor of his generation" is sitting on a mountain of assets, half of it locked up in Sears. Lampert's captors, by the way, are now locked up in prison.
ESTIMATED INCOME: $500 – $600 MILLION
RANK: 8
David Shaw
CITY: New York
FIRM: D.E. Shaw & Co.
AGE: 55
Now one of the biggest hedge funds on the planet, D.E. Shaw, with assets of around $20 billion, used its quantitative approach to churn out returns of roughly 20 percent in 2005. With 3-and-30 fees, this revenue stream boggles the mind. It doesn't all go to chairman Shaw, but enough does to put him in elite company. In the months ahead, we expect Shaw will be grappling with the tricky task of meeting regulatory obligations while keeping his computer-driven statistical arbitrage techniques from falling into the wrong hands.
ESTIMATED INCOME: $400 – $500 MILLION
RANK: 9
Jeffrey Gendell
CITY: Greenwich, Connecticut
FIRM: Tontine Partners
AGE: 46
It was yet another banner year for Gendell's enormous operation, which has been smoking the competition with a string of 100 percent–plus returns based on an activist strategy targeting industrials. When Tontine increased its stake in homebuilder Beazer Homes USA to 10 percent, Gendell demanded that management begin a share repurchase, which spurred a share-price hike of 25 percent within six weeks. On the philanthropic side, Gendell donated more than $2 million to Duke University, his alma mater, to fund two professorships in the new energy-and-environment graduate program there.
ESTIMATED INCOME: $300 – $400 MILLION
RANK: 10 (TIED)
Louis Bacon
CITY: New York
FIRM: Moore Capital Management
AGE: 49
A global macro maestro, Bacon orchestrated some solid performance for his $6 billion flagship Moore Global funds, which returned more than 15 percent last year. Meanwhile, several of his other funds (with some $4 billion run by several other portfolio managers) also fared well. The avid outdoorsman once again bagged quite a bounty.
ESTIMATED INCOME: $300 – $350 MILLION
RANK: 10 (TIED)
Stephen Mandel
CITY: Greenwich, Connecticut
FIRM: Lone Pine Capital
AGE: 50
It was a mondo-boffo year for Mandel, the Tiger Management alum, as his firm has now reached nearly $10 billion. His Lone Cedar fund, with $2 billion, was up over 20 percent. Mandel, who has expanded into long-only funds, is one of several hedgies who have indicated they don't plan to register with the SEC. We're guessing that could mean longer lockups. Clients likely won't mind.
ESTIMATED INCOME: $300 – $350 MILLION
http://www.trade2win.com/knowledge/magazines/printed/trader-monthly/
The Trader Monthly 100: Earn, Baby, Earn
Our third annual take on the world's highest-earning traders.
By: Rich Blake , A.D. Barber , Robert LaFranco
Issue: April/May 2006 , Page 69
If you're raking it in, there's a good chance you're making it in.
When Trader Monthly set out, in the summer of 2004, to cover the superstars of the investment world the way Rolling Stone covers rock stars and Forbes covers billionaires, we knew our list of the world's highest-paid traders might create a stir. And this year's list -- the third installment, based on 2005 performance -- is a bombshell.
Not only did each of our top two earners, T. Boone Pickens and Stevie Cohen, score estimated compensation figures north of $1 billion -- a first -- but this time, even the low-rent hedgehogs needed $40 million to make the cut. And to think conventional wisdom holds that hedge-fund managers underperformed last year. Hardly.
On Wall Street, some of the scores were gargantuan, as bulge-bracket banks enjoyed one of the most profitable years in the history of the markets, from asset-backed to credit and crude to crack spreads.
Speaking of energy, down at the NYMEX, we've uncovered a crop of red-hot traders -- some you may have heard of and others you might not know. In all, we've turned over more stones and worked longer and more aggressively to scrub, cajole and browbeat to get our estimates literally right on the money. We're confident this effort paid off. Trust us: You're in store for a detailed snapshot of who's making waves in the trading world.
Now, then -- on with the countdown...
When Trader Monthly's inaugural list of the top-earning traders appeared -- it was published in our premiere issue in November 2004 and based on 2003 compensation -- it got a lot of attention. We viewed it, however, as more of a starting point -- a first step toward the definitive accounting of who has the greatest effect on the financial markets.
Last year's list was an improvement, though we overshot on some (Wall Streeters Aziz Nahas and Angie Long) and underestimated others, particularly on the hedge-fund side (our figure for Eddie Lampert, for example, was quite low).
This year, we put inside information from our readers to greater use. We tried to do even more due diligence, ask more questions, consult more sources and generally be more proactive in getting these tight-lipped titans to talk to us. In short, we tried still harder.
Admittedly, apart from tapping high-placed sources within the IRS, nobody can pin these guys down with precision. However, by doing exhaustive interviews (with traders, finance-industry executives, former executives, friends, back-office staffers and headhunters) and scouring all available data (SEC filings, litigation filings, news articles, corporate Web sites, performance databases and comp-consultant reports), we feel our ranges are getting damn close.
One nagging question comes up a lot: Who is a trader?
For instance, would a portfolio manager merit inclusion on a list of traders? It's a philosophical conundrum, but we're less concerned with what your business card says and more preoccupied with our mission: covering the heavyweight champions of the investment world (that means you, Mr. Hedge Fund PM). Sure, we lean toward the true traders -- active, rapid-fire investors -- but activists, net longers, longer-termers: If you're raking it in, there's a good chance you're making it in.
We put 60 hedge-fund guys on this year's list, reserving 40 slots for more traditional bank and independent traders. In other words, we're keeping an open tent so the whole list isn't simply hedgies.
While hedge-fund performance numbers aren't always available to the public, they are widely known on the Street. We have a good idea of how each fund did and what its profits were, though extrapolating compensation of the individual or individuals responsible for those profits is the final and least scientific part of the process. Some guys stay lean on expenses and take the lion's share of the profits for themselves, while others share the wealth.
Some have large commitments to third-party marketing firms that eat into profits, while others have seen their personal ownership in the fund compound through successive years in which high performance numbers have created profits on investment that dwarf incentive and managment fees. In the end, reporting yielded some answers.
We called everyone on the Trader Monthly 100 prior to publication. Some confirmed our estimates; others tried to spin us higher or lower; still others refused to comment. Inevitably, there will be mistakes, omissions and exaggerations, but based on the tremendouse amount of feedback we're received from our subjects and our readers, we're confident that our process has improved dramatically over the course of the first two installments of the Trader Monthly 100 -- and we'll continue to strive for improvement in the future. That's our long-term position.
If you have feedback, we're listening -- please share it with senior editor Rich Blake at [email protected]
Trader Monthly 100: The Top 10
The highest-earning traders of 2005.
By: Rich Blake , A.D. Barber , Robert LaFranco
Issue: April/May 2006 , Page 69
Triple-digit returns off a 10-digit asset base that includes an oversized dose of his own money translates into what Trader Monthly believes is the largest one-year sum ever earned.
RANK: 1
T. Boone Pickens
CITY: Dallas
FIRM: BP Capital
AGE: 77
"Long crude" doesn't even begin to describe T. Boone Pickens's position. With $5 billion and growing in assets under management, his fund company, BP Capital, is throwing off a small national economy via an unshakable bet that the world's oil supply can't keep up with rising demand.
"Yes, my own money is in there," Pickens told Trader Monthly in January, describing his operation. "That always impresses the other investors."
And what's not to be impressed with? Returns on Pickens's main commodities pool were over 700 percent in 2005. His smaller equity fund was up more than 100 percent. While Pickens may not be heavily involved in trading on a day-to-day basis (the funds overall actually trade very little), his market view -- and oft-televised table thumping -- is what has driven BP's long-term strategy since oil was $20 a barrel.
When he's not out hyping the possibility of triple-digit crude prices or helping sink Democratic presidential hopefuls, Pickens donates money to pet rescue. Recently, he caught some flak when, as part of a tax loophole, he gave $165 million to Oklahoma State and the money ended up in his hedge fund. It's not a bad place to park a pile of dough, of course: Triple-digit returns off a 10-digit asset base that includes an oversized dose of his own money translates into what Trader Monthly believes is the largest one-year sum ever earned (in contrast to a Bill Gates–style appreciation in net worth), larger even than Michael Milken's legendary $550 million haul of 1986, adjusted for inflation.
ESTIMATED INCOME: $1.5 BILLION+
RANK: 2
Stevie Cohen
CITY: Stamford, Connecticut
FIRM: SAC Capital Advisors
AGE: 49
The man is called "Stevie," as if he were everybody's favorite soul singer or the neighborhood paperboy, yet he could very well be the richest trader who ever laid down a position. Either way, Cohen is certainly among the most admired living financial figures, second only perhaps to Alan Greenspan (who might end up working for Cohen, at the rate Cohen gobbles up market studs). Says one former SAC staffer: "Stevie has the most clout on the Street, the best contacts, an army of analysts and unlimited capital." A graduate of the University of Pennsylvania's Wharton School who got started in the late 1970s as a proprietary trader at Gruntal & Co., Cohen launched SAC in 1992 with $20 million. He has since amassed more than $7 billion that he personally runs -- not to mention 500 or so traders, analysts and support staff, creating an asset-management empire that spans two management companies (SAC Capital Advisors and SAC Capital Management), three main funds (SAC Capital Associates, SAC Capital International and SAC Global Diversified), two separate offices in Stamford and additional outposts in Manhattan, London and San Francisco. When Cohen comes upon a trader with exceptional skills, he'll seed him in-house -- or help put him in business on his own.
The SAC family had another impressive year in 2005 -- performance, for the most part, was 20 percent–plus, as it has been, amazingly, just about every year since Cohen began. With his incentive fee of up to 50 percent of total profits (though his newest fund, the SAC Multi-Strategy, is said to be 3-and-35, and we hear the rest of his vehicles going forward will follow suit), perhaps only a federal mint prints more money year in, year out than Cohen. Had it not been for an anomalous rough patch this past October (his only down month), his epic compensation amount might have been even greater. We figure the SAC empire took in revenues of at least $3 billion last year -- and if Cohen, conservatively, took one-third...
ESTIMATED INCOME: $1 BILLION+
RANK: 3
James Simons
CITY: East Setauket, New York
FIRM: Renaissance Technologies Corp.
AGE: 67
Jim Simons is a Euclid for our times: He has a Ph.D. in math from Berkeley, has won the prestigious Veblen Prize in geometry, taught at MIT and founded Math for America. Well, here are some numbers: $6 billion, as in Simon's assets under management at year end. Or how about 5-and-44, his notoriously stiff fee arrangement? Then, of course, there's $100 billion, the lofty target Simons has set for a net-long vehicle his firm recently started. Finally, there's the 28 percent return produced by his Medallion fund, which employs scientific models to predict price movements in commodities, currencies and equities.
"Certain price patterns are non-random," the former code-breaker cryptically told The New York Times in a rare interview last November. He could be on to something: After all, Medallion has averaged more than 30 percent, net of fees, every year over the past decade and a half -- or three times as much as the S&P 500 index over the same period.
Simons's hundreds of millions of dollars in charitable donations support everything from autism research to augmenting inner-city math teachers' salaries to atom-smashing Big Bang replication experiments at the Brookhaven National Lab.
ESTIMATED INCOME: $900 MILLION – $1 BILLION
RANK: 4
Paul Tudor Jones
CITY: Greenwich, Connecticut
FIRM: Tudor Investment Corp.
AGE: 51
As the long, hot summer of 2005 wore on, the flagship fund that anchors Paul Tudor Jones's roughly $14 billion hedge-fund empire was hardly sizzling. Reports were surfacing that like a lot of funds, it had suffered losses in May and -- gasp! -- was actually down 2 percent at mid-year. But never bet against a master. Jones staged a comeback, all right: His flagship fund (with assets of $2 billion) finished the year up roughly 14 percent, an improvement over the 12 percent return registered a year earlier.
Much of this commodities superstar's personal earnings have been plowed back into his funds over the years; thus it's astounding to speculate what he might actually be taking home. We attempted to err on the conservative side, because Jones has a reputation for paying his people extremely well. But, based on what we believe is at least a sizable personal stake, Jones's 2005 take had to be among his most enormous yet -- which is why he was able to do such things as back Harvey and Bob Weinstein's new media group, swap thousands of acres of pristine Colorado land with the federal government and help bankroll construction of a new 15,000-seat arena for the University of Virginia, his alma mater. It'll be called John Paul Jones Arena -- named after Jones's father, by the way, not the Revolutionary War naval hero.
ESTIMATED INCOME: $800 – $900 MILLION
RANK: 5 (TIED)
Stephen Feinberg
CITY: New York
FIRM: Cerberus Capital Management
AGE: 46
Known as the king of the vultures, Cerberus has some $16 billion in assets -- almost double its 2003 figure. Feinberg, who began at Drexel, personally runs around $4 billion, a portfolio that logged a 15 percent return after fees. He began in 1992 with just $10 million. Among some of his investors, according to media reports, have been Secretary of Defense Donald Rumsfeld and hedge-fund pioneer Michael Steinhardt. When the buyout world meets the hedge-fund world, a three-headed beast of giant deals, controversy and hefty returns usually emerges.
ESTIMATED INCOME: $500 - $600 MILLION
RANK: 5 (TIED)
Bruce Kovner
CITY: New York
FIRM: Caxton Associates
AGE: 61
Bruce Kovner's roughly $7 billion flagship fund once again generated high-single-digit returns last year, which is starting to become a trend for the once unstoppable commodities/macro titan. Nevertheless, his Caxton Global Investments still generated some staggering absolute returns -- at least $500 million. Next, take into account his other funds, some of which had pretty good years (the $350 million Caxton Alpha Equity, which Kovner comanages, for example, completed its first full year up 15 percent). Finally, consider that a lot of Kovner's own money is in the fund, and even by neo-conservative estimates it's clear the man is breathing some rarefied air.
Chairman of the board at the Juilliard School of Music -- he recently gave it one of the world's greatest music-manuscript collections -- he reportedly installed a soundproof music room in his Upper East Side townhouse so he could pound on a Steinway grand piano at night and not bother the neighbors. A staunch Republican, chairman of the American Enterprise Institute and backer, with Michael Steinhardt, of the New York Sun newspaper, Kovner has come a long way from trading soybean futures in his own account.
ESTIMATED INCOME: $500 – $600 MILLION
RANK: 5 (TIED)
Eddie Lampert
CITY: Greenwich, Connecticut
FIRM: ESL Investments
AGE: 43
Three years after a terrifying kidnapping and fresh off his Kmart coup, Lampert has the investment world at his command and some $15 billion under management. A value investor in the mold of Warren Buffett, he didn't have a 300 percent return on his Kmart position like last year; two of his two big long-term plays, Sears and AutoNation, were each up around 15 percent -- still not bad compared to the low-single-digit U.S. equity benchmarks. The man Richard Rainwater recently called "the greatest investor of his generation" is sitting on a mountain of assets, half of it locked up in Sears. Lampert's captors, by the way, are now locked up in prison.
ESTIMATED INCOME: $500 – $600 MILLION
RANK: 8
David Shaw
CITY: New York
FIRM: D.E. Shaw & Co.
AGE: 55
Now one of the biggest hedge funds on the planet, D.E. Shaw, with assets of around $20 billion, used its quantitative approach to churn out returns of roughly 20 percent in 2005. With 3-and-30 fees, this revenue stream boggles the mind. It doesn't all go to chairman Shaw, but enough does to put him in elite company. In the months ahead, we expect Shaw will be grappling with the tricky task of meeting regulatory obligations while keeping his computer-driven statistical arbitrage techniques from falling into the wrong hands.
ESTIMATED INCOME: $400 – $500 MILLION
RANK: 9
Jeffrey Gendell
CITY: Greenwich, Connecticut
FIRM: Tontine Partners
AGE: 46
It was yet another banner year for Gendell's enormous operation, which has been smoking the competition with a string of 100 percent–plus returns based on an activist strategy targeting industrials. When Tontine increased its stake in homebuilder Beazer Homes USA to 10 percent, Gendell demanded that management begin a share repurchase, which spurred a share-price hike of 25 percent within six weeks. On the philanthropic side, Gendell donated more than $2 million to Duke University, his alma mater, to fund two professorships in the new energy-and-environment graduate program there.
ESTIMATED INCOME: $300 – $400 MILLION
RANK: 10 (TIED)
Louis Bacon
CITY: New York
FIRM: Moore Capital Management
AGE: 49
A global macro maestro, Bacon orchestrated some solid performance for his $6 billion flagship Moore Global funds, which returned more than 15 percent last year. Meanwhile, several of his other funds (with some $4 billion run by several other portfolio managers) also fared well. The avid outdoorsman once again bagged quite a bounty.
ESTIMATED INCOME: $300 – $350 MILLION
RANK: 10 (TIED)
Stephen Mandel
CITY: Greenwich, Connecticut
FIRM: Lone Pine Capital
AGE: 50
It was a mondo-boffo year for Mandel, the Tiger Management alum, as his firm has now reached nearly $10 billion. His Lone Cedar fund, with $2 billion, was up over 20 percent. Mandel, who has expanded into long-only funds, is one of several hedgies who have indicated they don't plan to register with the SEC. We're guessing that could mean longer lockups. Clients likely won't mind.
ESTIMATED INCOME: $300 – $350 MILLION
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