| Survey of Hedge Fund Principals in September | | | | its story “Wall Street’s Top Earners: Your |
| 2007 showed that they considered recession in | | | | Pain, Their Gain.” The article begins: |
| 2008 very likely. Even then, they have an inkling | | | | “Problems paying the mortgage, filling the gas |
| of what is to happen, but chose to gamble just | | | | tank and feeding the family have eroded living |
| the same. Over 61% of the respondents believed | | | | standards for millions of Americans during the |
| a recession is "very likely". Almost 90% of the | | | | past several months. Not so for people who |
| hedge fund principals interviewed predicted that | | | | manage big piles of money: many of them made |
| market volatility will continue or increase through | | | | a fortune betting correctly on the housing debacle |
| the rest of 2007. | | | | and rising commodity prices last year.” |
| Over 200 hedge fund principals were surveyed, all | | | | Hedge funds and private equity funds are virtually |
| having a minimum of $100 million in assets being | | | | unregulated companies that cater to wealthy |
| managed, and being in operation for at least 5 | | | | investors, pension funds, university endowments |
| years. Surprisingly, only 17% thought a recession | | | | and the like. Hedge funds promise their moneyed |
| would have a negative effect on their funds. | | | | investors super-high returns from speculation in |
| Almost 67% said that a recession would actually | | | | stocks, bonds, derivatives and commodities. The |
| provide opportunities for investment. As the | | | | managers usually collect a fee of 2 percent on |
| Managing Principal of Rothstein- Kass, Howar | | | | the total investment of their clients plus a 20 |
| Altman, pointed out- the ability of hedge funds | | | | percent cut of any gains realized. |
| principals to outperform in turbulent markets is | | | | Gary Burtless, an economist at the Brookings |
| the reason for this confidence. Fewer than 15% | | | | Institution, said, “To some degree it’s a |
| planned to make changes to their funds’ | | | | very gigantic version of Las Vegas.” |
| underlying investment strategy. | | | | CEOs, who have presided over financial disasters |
| The annual ranking of top hedge fund earners | | | | and plummeting share prices, including those at |
| compiled by Alpha, a magazine that caters to | | | | major banks and investment houses, continue to |
| wealthy and institutional investors, reports that | | | | award themselves multi-million-dollar salaries and |
| the top money-maker, John Paulson, took home | | | | bonuses, and even those who have been forced |
| $3.7 billion last year, probably the richest | | | | to resign or retire at companies like Citigroup and |
| single-year haul in Wall Street history. Paulson, the | | | | Merrill Lynch have gotten severance packages |
| founder of Paulson & Company, was | | | | worth tens of millions of dollars. The concentration |
| followed by George Soros, who took in $2.9 billion, | | | | of wealth at the top and pervasive social |
| and James H. Simons, who netted $2.8 billion. The | | | | inequality is greater in the US today than at any |
| top 50 hedge fund managers took in a combined | | | | time since the Great Depression. A study released |
| sum of $29 billion. | | | | last week by the Economic Policy Institute and |
| To place these astronomical figures in some | | | | the Center on Budget and Policy Priorities |
| perspective, the combined take of these 50 | | | | reported that economic inequality has continued to |
| individuals is about the same as the annual gross | | | | grow rapidly this decade. Jared Bernstein, a senior |
| domestic product of Kenya, a country of 32.5 | | | | fellow at the Economic Policy Institute, said that |
| million people, and a billion dollars less than the GDP | | | | since 1913, the United States witnessed only one |
| of Sri Lanka, the home of 20 million people. | | | | other year of such unequal wealth |
| US hedge fund world amassed their windfalls by | | | | distribution—1928, the year before the stock |
| betting correctly that the US housing market | | | | market crash. |
| would collapse or speculating on the soaring price | | | | “Buyers this year have already closed on 71 |
| of basic commodities such as oil and foodstuffs. | | | | Manhattan apartments that each cost more than |
| They benefited from the housing and credit crises | | | | $10 million, compared with 17 apartments in that |
| that are driving millions in the US and other | | | | price range during all of 2007... And the GoodBar, |
| countries into foreclosure and threatening millions | | | | a downtown lounge, reports that bankers continue |
| more with hunger or outright starvation. | | | | to order $3,000 bottles of Rémy Martin Louis |
| Forbes magazine, which published its own survey | | | | XIII cognac. |
| of hedge fund and private equity CEOs, headlined | | | | |