Wednesday, March 25, 2009

Hedging Your Bets

The New York Times tells us this lovely morning that some hedge fund managers are still rolling in it:

As major markets and economies careened downward last year, 25 top managers reaped a total of $11.6 billion in pay by trading above the pain in the markets, according to an annual ranking of top hedge fund earners by Institutional Investor's Alpha magazine, which comes out Wednesday.

James H. Simons, a former math professor who has made billions year after year for the hedge fund Renaissance Technologies, earned $2.5 billion running computer-driven trading strategies. John A. Paulson, who rode to riches by betting against the housing market, came in second with reported gains of $2 billion. And George Soros, also a perennial name on the rich list of secretive moneymakers, pulled in $1.1 billion.

Of course, their earnings were not unscathed by the extensive shakeout in the markets. In a year when losses were recorded at two of every three hedge funds, pay for many of these managers was down by several million, and the overall pool of earnings was about half the $22.5 billion the top 25 earned in 2007.

Remind me to do an economics 101 post on those odd labor markets for 'financial geniuses' when I feel better. I'm not quite up to making it juicy and fascinating right now.

Instead, I'd like to draw your attention to an earlier post of mine, one about a study which argued that aggressive and risk-loving men have an edge in financial trading. It's a fun study to contemplate now that the markets have truly exploded. Some people even suggest that it may have been the macho corporate culture of financial firms that landed us in this mess.