Editing Hedge fund (section)

===Remuneration of portfolio managers===
Hedge fund management firms are often owned by their [[portfolio manager]]s, who are therefore entitled to any profits that the business makes. As management fees are intended to cover the firm's operating costs, performance fees (and any excess management fees) are generally distributed to the firm's owners as profits. Funds do not tend to report compensation, and so published lists of the amounts earned by top managers tend to be estimates based on factors such as the fees charged by their funds and the capital they are thought to have invested in them.<ref name=Goldstein>{{cite news |title=Paulson, at $4.9 billion, tops hedge fund earner list |first=Matthew |last=Goldstein |url=https://www.reuters.com/article/us-hedgefunds-richlist-idUSTRE7304N320110401 |work=Reuters |date=1 April 2011 |access-date=26 July 2012 |archive-url=https://web.archive.org/web/20121019020419/http://www.reuters.com/article/2011/04/01/us-hedgefunds-richlist-idUSTRE7304N320110401 |archive-date=19 October 2012 |url-status=live |df=dmy-all }}</ref> Many managers have accumulated large stakes in their own funds and so top hedge fund managers can earn extraordinary amounts of money, perhaps up to $4 billion in a good year.<ref name=Schwartz>{{cite news |title=Pay of Hedge Fund Managers Roared Back Last Year |first=Nelson D. |last=Schwartz |url=https://www.nytimes.com/2010/04/01/business/01hedge.html |newspaper=New York Times |date=31 March 2010 |access-date=8 August 2012 |archive-url=https://web.archive.org/web/20120630095938/http://www.nytimes.com/2010/04/01/business/01hedge.html |archive-date=30 June 2012 |url-status=live |df=dmy-all }}</ref><ref>{{cite book |title=Chasing Alpha |last=Augar |first=Philip |year=2009 |publisher=Bodley Head |location=London |isbn=978-1-84792-036-2 |page=65}}</ref>

Earnings at the very top are higher than in any other sector of the financial industry,<ref name=bbchedge>{{cite news |url=https://www.bbc.co.uk/news/business-11942117 |title=Masters of the universe: meet the world's best-paid men |first=Richard |last=Anderson |date=2 February 2011 |publisher=BBC |access-date=28 July 2012 |archive-url=https://web.archive.org/web/20121110111757/http://www.bbc.co.uk/news/business-11942117 |archive-date=10 November 2012 |url-status=live |df=dmy-all }}</ref> and collectively the top 25 hedge fund managers regularly earn more than all 500 of the chief executives in the [[S&P 500]].<ref>{{cite journal |ssrn=2134208 |title=Executive Compensation and Corporate Governance in the U.S.: Perceptions, Facts and Challenges |author=Kaplan, Steven N. |date=22 August 2012 |journal=Chicago Booth Research Paper No. 12-42; Fama-Miller Working Paper |publisher=Social Science Research Network }}</ref> Most hedge fund managers are remunerated much less, however, and if performance fees are not earned then small managers at least are unlikely to be paid significant amounts.<ref name=bbchedge/>

In 2011, the top manager earned $3 billion, the tenth earned $210 million, and the 30th earned $80 million.<ref>{{cite news|last=Vardi|first=Nathan|date=3 January 2012|title=The 40 Highest-Earning Hedge Fund Managers|work=Forbes|url=https://www.forbes.com/sites/nathanvardi/2012/03/01/the-40-highest-earning-hedge-fund-managers-3/|url-status=live|access-date=12 July 2021|archive-url=https://web.archive.org/web/20120723220442/http://www.forbes.com/lists/2012/hedge-fund-managers-12_land.html|archive-date=23 July 2012|df=dmy-all}}</ref> In 2011, the average earnings for the 25 highest-compensated hedge fund managers in the United States was $576 million<ref name=Westbrook>{{cite news |title=Pay For Top-Earning U.S. Hedge Fund Managers Falls 35%, AR Says |first=Jesse |last=Westbrook |url=https://www.bloomberg.com/news/2012-03-30/pay-for-top-earning-u-s-hedge-fund-managers-falls-35-ar-says.html |work=Bloomberg |date=30 March 2012 |access-date=8 August 2012 |archive-url=https://web.archive.org/web/20120615130222/http://www.bloomberg.com/news/2012-03-30/pay-for-top-earning-u-s-hedge-fund-managers-falls-35-ar-says.html |archive-date=15 June 2012 |url-status=live |df=dmy-all }}</ref> while the mean total compensation for all hedge fund investment professionals was $690,786 and the median was $312,329. The same figures for hedge fund CEOs were $1,037,151 and $600,000, and for chief investment officers were $1,039,974 and $300,000, respectively.<ref name=Tunick>{{cite news |title=Compensation Survey:Banking on the Back Office |first=Britt Erica |last=Tunick |url=http://www.absolutereturn-alpha.com/Article/3036783/Compensation-Survey-Banking-on-the-Back-Office.html |archive-url=https://archive.today/20130116044009/http://www.absolutereturn-alpha.com/Article/3036783/Compensation-Survey-Banking-on-the-Back-Office.html |url-status=dead |archive-date=16 January 2013 |magazine=Absolute Return + Alpha |date=1 June 2012 |access-date=8 August 2012 }}</ref>

Of the 1,226 people on the ''Forbes'' World's Billionaires List for 2012,<ref>{{cite magazine |url=https://www.forbes.com/billionaires/list/ |title=The World's Billionaires |date=March 2012 |magazine=Forbes |access-date=9 August 2012 |archive-url=https://web.archive.org/web/20110802223425/http://www.forbes.com/wealth/billionaires/list |archive-date=2 August 2011 |url-status=live |df=dmy-all }}</ref> 36 of the financiers listed "derived significant chunks" of their wealth from hedge fund management.<ref>{{cite news |url=https://www.forbes.com/sites/edwindurgy/2012/03/09/billionaire-hedge-fund-managers/ |title=Billionaire Hedge Fund Managers |first=Edwin |last=Durgy |date=9 March 2012 |work=Forbes |access-date=9 August 2012 |archive-url=https://web.archive.org/web/20120728122211/http://www.forbes.com/sites/edwindurgy/2012/03/09/billionaire-hedge-fund-managers/ |archive-date=28 July 2012 |url-status=live |df=dmy-all }}</ref> Among the richest 1,000 people in the United Kingdom, 54 were hedge fund managers, according to the ''Sunday Times'' Rich List for 2012.<ref>{{cite web |url=http://hereisthecity.com/2012/04/27/alan-howard-tops-hedge-fund-rich-list-with-personal-fortune-of-1/ |archive-url=https://archive.today/20130126192208/http://hereisthecity.com/2012/04/27/alan-howard-tops-hedge-fund-rich-list-with-personal-fortune-of-1/ |url-status=dead |archive-date=2013-01-26 |title=Sunday Times Hedge Fund Rich List 2012 |date=April 2012 |work=HITC Business |publisher=Here Is The City |access-date=12 July 2012 }}</ref>

A portfolio manager risks losing his past compensation if he or she engages in [[insider trading]]. In ''[[Chip Skowron|Morgan Stanley v. Skowron]]'', 989 F. Supp. 2d 356 (S.D.N.Y. 2013), applying New York's [[faithless servant]] doctrine, the court held that a hedge fund's portfolio manager engaging in insider trading in violation of his company's code of conduct, which also required him to report his misconduct, must repay his employer the full $31 million his employer paid him as compensation during his period of faithlessness.<ref name="auto6">{{Cite book|url=https://books.google.com/books?id=3RaGDwAAQBAJ&q=%22faithless+servant%22&pg=PA472|title=Employment Law: Private Ordering and Its Limitations|first1=Timothy P.|last1=Glynn|first2=Rachel S.|last2=Arnow-Richman|first3=Charles A.|last3=Sullivan|date= 2019|publisher=Wolters Kluwer Law & Business|isbn=978-1-5438-0106-4|via=Google Books}}</ref><ref name="auto4">{{cite web|url=https://www.ibtimes.co.uk/faithless-ex-morgan-stanley-fund-manager-ordered-repay-31m-former-employer-1429819|first=Jerin|last=Matthew|title='Faithless' Ex-Morgan Stanley Fund Manager Ordered to Repay $31m to Former Employer|date=December 20, 2013|website=International Business Times UK|access-date=7 August 2019|archive-date=12 July 2023|archive-url=https://web.archive.org/web/20230712231643/https://www.ibtimes.co.uk/faithless-ex-morgan-stanley-fund-manager-ordered-repay-31m-former-employer-1429819|url-status=live}}</ref><ref>{{cite web|url=https://dealbook.nytimes.com/2013/12/23/the-huge-costs-of-being-a-faithless-servant/|title=The Huge Costs of Being a 'Faithless Servant'|first=Peter J.|last=Henning|date=December 23, 2013|website=New York Times DealBook|access-date=7 August 2019|archive-date=23 December 2013|archive-url=https://web.archive.org/web/20131223170550/https://dealbook.nytimes.com/2013/12/23/the-huge-costs-of-being-a-faithless-servant/|url-status=live}}</ref><ref>{{cite web|url=https://www.greenwichtime.com/news/article/Morgan-Stanley-seeks-10-2-million-from-convicted-4193127.php|title=Morgan Stanley seeks $10.2 million from convicted former trader|date=January 15, 2013|work=GreenwichTime|access-date=7 August 2019|archive-date=27 June 2019|archive-url=https://web.archive.org/web/20190627172218/https://www.greenwichtime.com/news/article/Morgan-Stanley-seeks-10-2-million-from-convicted-4193127.php|url-status=dead}}</ref> The court called the insider trading the "ultimate abuse of a portfolio manager's position".<ref name="auto4"/> The judge also wrote: "In addition to exposing Morgan Stanley to government investigations and direct financial losses, Skowron's behavior damaged the firm's reputation, a valuable corporate asset."<ref name="auto4"/>