Just How Rich Are the Richest Hedge Fund Managers?

When it comes to the most profitable hedge fund managers in the world, there is one thing that Alpha Magazine and Trader Monthly can agree on: John Paulson of Paulson & Co. made the most last year.

Aside from that, the two annual lists show many discrepancies that underscore just how murky the world of hedge fund performance is.

The top of both lists share a number of names: Paulson, Jim Simons of Renaissance Technologies, Phil Falcone of Harbinger Capital, Kenneth Griffin of Citadel, and Steven Cohen of SAC Capital appear in the top ten in both publications.

But George Soros, the fund manager that Alpha Magazine named second-richest with earnings of $2.9 billion in 2007, doesn't even appear at all on Trader Monthly's top 100.

Trader's number seven, Alan Howard of Brevard Howard Asset Management in London, earned between $700 million and $800 million by the magazine's estimates. But Alpha Magazine ranks him down in 41st place, with estimated earnings of just $245 million.

Some discrepancies make sense. Trader Monthly named Chris Hohn of The Children's Investment Fund in London the sixth top earner, with estimated income of $800 million to $900 million. Alpha Magazine said it excluded Hohn (who it estimates brought in just $600 million last year) because his fees went to charity, which is the Children's Investment Fund Foundation run by his wife.

The wide variations in estimated incomes between the two lists show just how hard it is to determine how any of these funds are actually performing. Hedge funds, after all, aren't required to report much of anything to regulators, so the investor magazines were forced to rely on a lot of speculation. Trader Monthly explains its methodology is based on "inside information from numerous well-placed sources, multiple hedge-fund performance databases, SEC filings, hundreds of published accounts, litigation filings, company Web sites and other public records." It also contacted each person on the list. "Some confirmed our estimates; others tried to spin us higher or lower; still others refused to comment," the magazine reports.

What's most striking is that the magazines can't even agree on the performance of publicly traded hedge funds, such as GLG Partners. The London-based fund went public through a SPAC offering last year.

Trader Monthly names GLG's Noam Gottesman number seven, with $700-$800 million in income. The fund's Pierre Lagrange comes in at number nine with the same estimated income, and Greg Coffey was number 11 with $500 to $600 million in income.

Over at Alpha Magazine, however the year wasn't quite as kind to GLG as Trader Monthly seems to believe. Gottesman and Lagrange tied at #27 with just $350 million each in earnings. Coffey earned $300 million and tied with Carl Icahn and Paul Tudor Jones at #31. (Icahn, it's worth noting, was absent from Trader Monthly's 100 entirely.)

So much for transparency in the public markets.

by Megan Barnett