Daily Ticker

Mega Million Lottery, CEO Pay’s Got Nothing on These Hedge Fund Bigwigs

Aaron Task
Daily Ticker

Friday's Mega Million lottery is $540 million, an incredible sum that's sending millions of Americans scurrying to buy tickets for an estimate 1-in-176 million chance of victory.

What's even more amazing about Friday's record Mega Million prize is that it's dwarfed by the 2011 payouts for five individual hedge fund managers, according to AR Magazine's annual "Rich List" ranking.

Topping the list is Bridgewater Associate's Ray Dalio, whose personal 2011 payday was $3.9 billion -- or more than 7 times Friday's Mega Million prize.

Bridgewater's largest fund rose over 16% last year vs. 2% for the S&P 500 and a decline of 5% for the average hedge fund, according to AR. With over $120 billion in assets, Bridgewater's big return generated huge fees for Dalio and his team. Two of Dailo's top lieutenants, Greg Jensen and Robert Prince, each took home $425 million last year, The NYT reports.

Rounding out the top 5 highest-paid hedge fund managers were Carl Icahn ($2.5 billion), James Simons ($2.1 billion), Kenneth Griffin ($700 million) and Steven Cohen ($585 million).

These sums are so staggering it's hard to comprehend anyone making so much money in one year. By way of comparison, median CEO pay in 2011 rose 2% to $9.6 million, according to USA Today.

Of course, while CEOs seem to get paid the big bucks no matter how well (or poorly) the company does, there's nothing guaranteed about compensation for hedge fund managers. Notably absent from 2011's list was John Paulson, who made a record $5 billion in 2010 and $3.5 billion in 2007. Last year, one of Paulson's largest funds lost 50%, a stinging reminder of the old Wall Street saying: Past performance is no guarantee of future returns.

That's one lesson of these huge payouts. The other, as Henry and I discuss in the accompanying video, is that the amount of firepower and brainpower these mega-wealthy hedge funds dedicate toward generating returns dwarfs what the so-called average individual investor can bring to the table, yes, even in this error of real-time quotes and snazzy charting tools available online.

Retail investors trying to "beat the market" truly are swimming with sharks, and quite a few killer whales.

Aaron Task is the host of The Daily Ticker. You can follow him on Twitter at @aarontask or email him at altask@yahoo.com

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