If you have billions of dollars at the beginning of the year, and you invest your money, and the market goes up, then at the end of the year you’ll have made hundreds of millions of dollars. This is very obvious, but here is your annual reminder of it, dressed up as overpaid hedge fund managers
The management fees often add up to a sizable sum at the largest firms, many of which charge between 2 and 5 percent. We also count the gains on the individual’s own capital in their funds, which can be considerable.
The gray bars are (roughly!) the returns on the managers’ hedge funds: If the managers had just put all their money in their own funds, they would have earned those amounts even without charging any fees. The blue bars are the amounts the managers actually earned (in percent of their wealth, or in dollars). The blue bars are bigger than the gray bars, mostly. But the gray bars make up the bulk of the money. The top 10 hedge fund managers made $8.23 billion in 2014, of which $5.76 billion (70 percent) looks like just return on their own capital and $2.47 billion (30 percent) does not.