Hedge Fund Managers Are Winning: 2015 Another Year of 'Outrageous Compensation'
New rankings show top 25 managers had combined earnings of $12.94 billion last year
2015 was a "another year of outrageous hedge fund compensation," said Robert Weissman, president of advocacy organization Public Citizen.
Sparking his statement is the latest Rich List published by Institutional Investor's Alpha magazine, which reveals that the industry's top 25 managers made an average of $517.6 million, and had combined earnings of $12.94 billion.
The men at the top five spots all earned over $1 billion.
Topping the list are Kenneth Griffin of Citadel and James Simons of Renaissance Technologies, who each took in $1.7 billion. Simons has the distinction of being the only manager to appear on the list for its entire 15-year history. Griffin, the New York Times reports, "was the biggest donor to the successful re-election campaign of Mayor Rahm Emanuel of Chicago. More recently he has poured more than $3.1 million into the failed presidential campaigns of Marco Rubio, Jeb Bush and Scott Walker, as well as the Republican National Committee.
The higher payday came "despite the fact that roughly half of all hedge funds lost money last year," said Institutional Investor Editor Michael Peltz. He added that "about half of the 25 highest-earning hedge fund managers used computer-generated investment strategies to produce their investment gains."
The Times also notes that "Even as regulators push to rein in compensation at Wall Street banks, top hedge fund managers earn more than 50 times what the top executives at banks are paid." But according to Sam Pizzigati, who edits Too Much, the Institute for Policy Study's online weekly newsletter on excess and inequality, "the real enormity of America's annual hedge fund jackpots only comes into focus when we contrast these windfalls to the rewards that go to ordinary Americans. Kindergarten teachers, for instance."
"The 157,800 teachers of America’s little people, the Bureau of Labor Statistics tells us, together make about $8.34 billion a year," he wrote.
As the Washington Post notes, "Hedge fund managers' profits are treated as long-term capital gains, which means they're taxed at no more than 15 percent. Critics say those earnings should be taxed as ordinary income, or as much as 39.6 percent."
Among the critics of such taxation policies is the Patriotic Millionaires, a group of wealthy Americans who argue that they, and corporations, should pay a greater percentage of taxes. Its members include Frank Patitucci, CEO and Owner of NuCompass Mobility, who said, "The concept of taxing 'carried interest' as capital gains makes no logical sense."
Added Patriotic Millionaire Terence Meehan, Chairman of Azimuth Investment Management, "I am in the hedge fund and private equity business and the carried interest loophole is welfare for the wealthy."
For Stephen Lerner, a fellow at Georgetown University's Kalmanovitz Initiative for Labor and Working Poor, these managers are merely a reflection of our "winner-take-all politics."
Billionaire hedge fund managers have been leveraging huge amounts of investor capital to extract enormous cash payouts for themselves, the ultimate in “winner-take-all” economics. To squeeze out these payouts, they’ve been pressuring the enterprises they dominate to slash wages, eliminate pension and health benefits, and offshore middle-class jobs.
Hedge fund fee structures, in the meantime, divert most of the profits these tactics generate back to self-dealing hedge fund managers. The investors that supply hedge funds their capital — like public employee pension funds — end up getting diminishing or actual negative returns.
Hedge fund billionaires also reflect our “winner-take-all” politics. Their massive campaign donations and lavish funding of lobbyists, right-wing think tanks, and other influence-peddlers buy unfair legal, fiscal, and regulatory advantages. Some of these billionaires do fund private philanthropy, but many of the most high-profile financiers focus on rigging the political system in their own favor.
As Weissman sees it, voters are very aware of this rigged political system.
"There's a lot of noise in this year's election, but if there's one consistent theme, it's that people are furious with a rigged system. And they are right to be angry," his statement continues. "They are furious with a financial system that lets so few make so much, when so many are making so little. And they can't begin to comprehend how people making more than $1 billion a year pay a lower tax rate than people struggling to get by."
"With voters rising up," he adds, "the Gilded Age for the hedge fund gazillionaires should come to an end."