These traders are doin' OK!

[wayneL]

Hi Folks,

"Traders" have been copping a bit of flak in this forum, being whopped over the head with the ubiquituous "Buffett" club.

Well these chaps are traders and they're making enough to pay the groceries....even after all that brokerage

Interesing paragraph down near the bottom.

http://biz.yahoo.com/usat/060526/13568510.html

USATODAY.com
$363M is average pay for top hedge fund managers
Friday May 26, 12:16 am ET
By Adam Shell, USA TODAY

James Simons, a mathematician turned money manager who prefers hiring Ph.D.s over MBAs, inched out oil tycoon T. Boone Pickens Jr. as the world's best-paid hedge fund manager in 2005, collecting an estimated $1.5 billion, according to rankings released today by Institutional Investor's Alpha magazine.


In rising to the top of what amounts to a who's who list of the secretive hedge fund world, Simons, of Renaissance Technologies, unseated 2004's top earner and first-ever billion-dollar man, Edward Lampert of ESL Investments, who is best known for buying Kmart and masterminding the blockbuster deal to buy Sears. Lampert's earnings dipped to an estimated $425 million last year, down from $1.0 billion in 2004.

"These are staggering numbers," said Alpha editor Michael Peltz in announcing its fifth-annual list of Top 25 earners. "It took $130 million to make the list."

Pickens also topped $1 billion, earning an estimated $1.4 billion. The average pay of the 26 (there was a tie for 25th place) on the list was $363 million, up 45% from $251 million in 2004.

Other big-name managers with big-time reputations in the top 10 included: financier George Soros, who was named "the man who broke the Bank of England" in 1992 after a winning bet against the British pound netted him more than $1 billion; Steven Cohen of SAC Capital Advisors, whom BusinessWeek called "the most powerful trader on Wall Street you've never heard of" in a July 2003 cover story; and legendary trader Paul Tudor Jones II. "These top earners are the best of the best, the real superstars," says Ryan Pearson, senior vice president at hedge fund consultancy Greenwich-Van Advisors.

The surge in pay comes amid an explosive growth in the industry, which now has roughly 8,000 funds and $1.2 trillion in assets. A lucrative business model for hedge fund managers, which, on average, entitles them to 2% of assets under management and 20% of the profit, makes these large paydays possible, Peltz says. A $10 billion fund would earn $200 million from the 2% management fee alone. Super-successful managers charge even more. Simons, the No. 1 earner last year, charges a 5% management fee and 44% of profits, Alpha's Peltz says.

Simons, whose firm, Peltz quips, has enough "rocket scientists to run their own space program," makes its money trading "often and frequently" with the help of computers, trying to capture small price movements. Pickens profited from the boom in energy prices.

The managers didn't just line their own pockets. "I suspect they have made more money for their clients than themselves," says Charles Davidson, hedge fund director at Standard & Poor's.

 

[NettAssets]

It just goes to show you're better off on wages than trading for yourself.
And is 300 Million going to be a living wage in this new round of inflation.
John

 

[wayneL]

It just goes to show you're better off on wages than trading for yourself.
And is 300 Million going to be a living wage in this new round of inflation.
John

Living frugally, I reckon I could just scrape by. HAHA

 

[NettAssets]

Be a mongrel to have to sell the Lear
John

 

[wayneL]

Be a mongrel to have to sell the Lear
John

Hah! Being the nostalgic retro type bloke I am, I'd wouldn't mind settling for a second hand 747 anyway.

Gawd life's a byatch!

 

[Nick Radge]

You guys have it wrong. These "payday's" are based on funds under management, not trading profits. The goal is to have as much under management as possible rather than make monster money.

Look at the BRW Young Rich List. You will see Richard & Angus Grinham. Both in their 30's (their ofices are in Crows Nest) making about $50m from managing money trading futures using technical analysis. The money they make is generated from the management and performance fee's based on the US$1 billion they manage. Their annual returns are about 10%.

Also look at Toby Crabel who managed over US$1 billion. . Makes about US$100m a year in fee's. His annual returns are 9%. What makes him so good is that he makes 9% regardless of what any other core portfolio is doing and also does so with amazingly low volatility. He's almost like a turbo charged cash management account.

Great trader or great funds manager?

The best quote I ever heard was from Tudor Jones:

"Some perople make houses. Some people make shoes. I make money and people are willing to pay me a lot to do that"

On a side note. Those knuckle heads at Intelligent Investor said you'll never find a rich technical analyst. Grinham's are in their own backyard!

 

[NettAssets]

Hi Nick
Thats a bit of a chicken and egg augument isn't it ?
If they didn't have the results they would not have the funds under management.
John

 

[Ageo]

hmm 2% management fees of a $billion dollars is not too bad. So who's ready to go out on a limb and start there own fund? heheh

Wayne just tell them returns over 400% is nothing to us. (That way they start to flock in hehe).

 

[Realist]

being whopped over the head with the ubiquituous "Buffett" club.

Well the lady below is a gambler, and she's made enough to pay the groceries....

Old bag wins lotto!!

After 45 years of wasting her weekly income on pokies, keno, lotto and scratchies, Esther Smith or Bonnydoon won $16M on Powerball last week. She recommends everyone buys as many lotto tickets as they can afford. "If I can do it anyone can" said Esther.

Just kidding. But I'm sure you get my point. Trading and gambling works for some. Investing works for everyone. :

 

[It's Snake Pliskin]

Well the lady below is a gambler, and she's made enough to pay the groceries....



Just kidding. But I'm sure you get my point. Trading and gambling works for some. Investing works for everyone. :

We need guys like you Realist. I@m sure you realise what I mean.

 

[Realist]

We need guys like you Realist. I@m sure you realise what I mean

not really sure what you mean.

But it would be pretty boring here if everyone agreed.

I love baiting traders - it is excellent fun..

 

[Staybaker]

You guys have it wrong. These "payday's" are based on funds under management, not trading profits.

Hmmm, not so sure about that (although you are no doubt right in some cases). Simons, for example, gets 44% of profits according to the article, so a bigger profit translates quickly to a bigger payout for him. Not only that, but these guys have lots of their own money in their funds. And finally, I seem to remember reading that these US hedge fund returns were much higher than the 10% or so that you mention (I could try and find the reference again if you're interested). In a nutshell, I'd say that high profits are very important to them.

Cheers, Staybaker.

PS: Guys, the plural of "fee" is "fees", not "fee's".

 

[bullmarket]

I love baiting traders - it is excellent fun..

just as well for me then that I am an investor whose number 1 priority nowadays is income and not capital gains

cheers

bullmarket

 

[bunyip]

Look at the BRW Young Rich List. You will see Richard & Angus Grinham. Both in their 30's (their ofices are in Crows Nest) making about $50m from managing money trading futures using technical analysis. The money they

On a side note. Those knuckle heads at Intelligent Investor said you'll never find a rich technical analyst. Grinham's are in their own backyard!

Nick....Where is Crows Nest?

 

[Ageo]

We need guys like you Realist. I@m sure you realise what I mean.

You mean we need people to not become wealthy so they still work? hehhe


Bunyip Crows Nest is in Sydney

 

[coyotte]

Nick....Where is Crows Nest?

Northern Suburb of Sydney (north shore)

 

[bunyip]

Northern suburbs of Sydney eh? Righto, thanks lads.

 

[Realist]

You mean we need people to not become wealthy so they still work? hehhe

Hahaaa.

There was some guy in the 1980's or 1990's whose motto was "Everybody can be rich!!"

Needless to say he was a laughing stock a few years later, and still a running joke.

Yeah I aint rich, I have to work.

I will be rich though eventually, and that is more than most people can say.

 

[Ageo]

Hahaaa.

There was some guy in the 1980's or 1990's whose motto was "Everybody can be rich!!"

Needless to say he was a laughing stock a few years later, and still a running joke.

Yeah I aint rich, I have to work.

I will be rich though eventually, and that is more than most people can say.

hehe i hope you didnt take offense mate its all good. And yes you are right most people will never become rich simply because they are telling themselves that from day 1.

Good to see you're on track

 

[Nick Radge]

Chicken & Egg.. or a good business model?

Is making a 10% annualised return make you a good trader? Apparently not to the vast majority of people who have no respect for risk adjusted returns.
However, in the world of alternative investments its everything. Let's assume my info on the Grinhams is correct (I personally know them so we might be able to squeeze that assumption through), they have been trading for 16-years with an annualised return circa 10%.

Look at Echardt. He has an annualised return of 27% yet manages just $250m. This is because his maxDD is closer to 40% and is too volatile. Whereas someone like Crabel who has an annualised return nearer 10% with a minimal drawdown managed over US$1 bill because he is Mr Consistent AND Mr Low Risk.

Assuming Richard Grinham was straight out of Uni 16-years ago, what capital do you think he started with to making $30m a year from trading profits at 10% annualised?

Also note that many of these fund manager DO NOT have their own funds in the same fund. Some do, yes, but others don't. This is because it allows them to remain psychologically detached from the process and not tinker with the system during bad times.