Hedge Fund Fees Are Optional – Regulations Are Not

Much is made of the fees hedge funds charge clients. Hedge fund fees and hedge fund manager earnings are almost daily fodder for media pundits and presidential candidates alike. Arguments are put forward, which compare the top 25 hedge fund manager salaries in 2014 to the aggregate salary of the country’s 158,000 kindergarten teachers. The former earned $11.6 billion and the latter earned $8.5 billion. Lips quiver, scowls emerge and, with palpable indignation, they inquire, “How fair is that?”

Freedom of Choice

The United States touts itself as a free society, a democracy, a place where anyone willing to make the effort can achieve their dreams, a place where you can attain any station in life to which you aspire, but—heaven forbid if you succeed!

Kindergarten teachers are besmirched because they don’t make huge salaries and hedge fund managers are maligned for successfully managing their investors’ money. Did not the overwhelming majority of kindergarten teachers understand the salary structure for that vocation? Were there kindergarten teachers who had a burning desire to be a hedge fund manager, but were told, “No, I’m sorry, you can’t do that?”

Rocket scientists earn around $100,000 per year, on average, and we can be reasonably certain that most of these rocket scientists understood the salary limitations before pursuing their career path. Are rocket scientists and kindergarten teachers intelligent enough to be hedge fund managers? Of course they are! However, they chose to pursue other options … emphasis on “chose.”

The median annual income for a hedge fund senior portfolio manager is around $500,000 and the median annual income for a founder is about $1.2 million. Good money to be sure, but nothing that approaches the enormous salaries earned by outliers in the hedge fund industry.

And While We Are on the Subject of Choice

There have been no reported cases of individuals or institutions having been forced to invest in a hedge fund against their will. Regardless of which side of the argument you find yourself, hedge fund fees are the price of admission. If you want in, you pay the fees. If you don’t want to play, you certainly don’t have to play.

The Tsunami of Regulations

While the media and politicians are quick to point an accusatory finger at the hedge fund industry, CEOs and the uber-wealthy in general, little mention is made of the estimated $24 billion regulatory burden Dodd-Frank has exacted from the financial sector and consumers of the financial sector’s products and services. Other regulations in the pipeline promise to add an additional $7.8 billion to the current total.

Hedge Fund Jobs

Clearly, significant opportunities for employment in the hedge fund industry exist for those with regulatory experience. The government has laid a veritable minefield for the financial industry to traverse. Those individuals with compliance skills and/or a strong background in regulation will find interviews. If there is any “silver-lining” to the groundswell of financial regulation since the 2008 financial crisis, this is it.

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Nelson Thomson September 15, 2015 at 8:10 am

The litany of regulation may have something to do with things like the LIBOR scandal, muni pricing scandal , Madoff, and sub-prime.
Since you are discussing choice, you made a choice to be in a hedge fund. The laws of the land are passed by a government elected by the people. If you disagree with the law, then write your congressman.

Paolo September 16, 2015 at 7:57 pm

I would with 99.9 precent state all these hedge funds and people who run them making multi Billions of dollars each year in profit and the owners of these funds making billions of dollars in wages is because its all insider trading.

The probability that you could be making billions every year “outside looking in” is so absurd, thus the only way to make this kind of money is you are the casino with all the rules and you control it all. You make your money from all the hundreds of millions of investors around the globe ( Sovereign wealth funds, Pension funds, mutual funds – who are all the lemmings in the game…getting slaughtered ).

Of course now and then a billionaire goes to jail like Raj Ratnam….and he only became rich ONLY FROM INSIDER TRADING.

The club decides who stays out of jail and who goes in.

So your point about these hedge funds returning great returns to their investors is all bogus…they would be losing investors money but for insider trading. And their investors are probably tied to them as well..either in the judiciary or the like..so they will never go to jail…just get slapped a la Cohen.

So teachers and Scientists study and go and get a job..and most of them do a great service for pay, but not the best pay.

Take all these billionaire hedge fund managers, take them away from Wall Street and the network of insider trading…and within 3 years THEY WILL ALL BE BROKE…with a tin cup in their hand looking for change.

If you let me control the market, I can make a homeless person a Billionaire over and over again.

Its all bogus. But then again, guys like Zanger and ALL others OUTSIDE LOOKING in who make great money…..are the real studs not your insider trading billionaires.

Shame on you…but alas you have to promote your stupid diatribe.

I daytrade the TF ( mini russell 2000 ) ES ( emini S&P) 500. I can assure I’m a better trader than most if not all those hedge funds guys…but give me the ability to trade 1000,2000,3000,5000 or more contracts each day…and I can move and control the market. Give these “losers” 1, 2, 3 contracts to trade per trade…..they will lose ALL the time for they can’t then control the market.

If you daytrade..you will know.

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