5 Guys Made More Than $1 Billion Last Year Doing This

A broker wears a costume while working

A stock broker wears a costume while making money | Daniel Roland/AFP/Getty Images

While you’ve been stuck working a dead end job, or perhaps something that’s simply disgusting and pays little, other people are finding ways to make unbelievable amounts of money. Of course, finding a way to become successful is the one thing that everyone strives to do, and success has many measures. But if, in your mind, success simply means making gobs and gobs of money, a select group of people have apparently found out how to do it.

What do they do? They manage hedge funds — and pull in absolutely absurd salaries to do it. In fact, the five highest-earning hedge fund managers, according to a list from Institutional Investor, each made more than $1 billion last year. Combined, those five made $7.35 billion.

The people comprising that short list are not exactly household names, either. The top earner, for example, is Kenneth Griffin of Citadel. He’s followed up by James Simons of Renaissance Technologies, and Raymond Dalio of Bridgewater Associates. Again, these are men that most average Joes have probably never heard of — yet they’re making more money than any CEO or professional athlete out there.

All told, the top 25 hedge fund managers combined to make more than $13 billion last year alone. That’s a lot of money — and more than most corporations make. For comparison, a quick glance at the Fortune 500 list shows that Apple made $39.5 billion in 2014, and ExxonMobil made $32.5 billion. That means that 25 individuals combined were not far off from earnings comparable to those two companies.

As far as the care that went into developing Institutional Investor’s rankings, the list says that each manager’s fees and gains on capital were used to calculate their ultimate payday. Interestingly enough, median earnings were actually down last year in comparison to previous years, with the median earner making a mere $275 million.

This kind of money likely sounds absolutely insane to your average American. The average American household earned roughly $54,000 last year, and many of those include multiple earners.

Seeing these guys pull in ten-figure paychecks may leave you with a sinking feeling in your stomach, or it could light a fire under your ass. How are these guys making this much money, and what, exactly are they doing? Most of us are probably familiar with the term “hedge fund,” but it’s still fairly ambiguous to those who don’t work in the world of finance or business.

So, what are hedge funds, and can you manage one yourself?

To address the first part, a hedge fund is somewhat self-explanatory. It’s an investment fund, which is managed by someone who is skilled enough to make margin calls and earn profits. People give their money to a hedge fund manager to invest, and expect a return. In effect, many investors pool their money under a manager, who takes it and uses his savvy to make smart investments — buying and selling when the time is right — to turn a profit.

Investors trust that these managers will earn them a return, which is why they hand over their money. The “hedge” part of the name comes from the term “hedging your bet,” which is essentially how managers make their decisions. It’s a bit difficult to wrap your head around, so do some extra reading to get a better understanding of how it all works.

As for part two — can you do it? The answer is probably no, and the reason why is because you probably wouldn’t be able to convince anyone (investors) to trust you with their money. If you’re an average Joe who has dreams of taking your investing skills and raking in billions, you’ll need to show that you know what you’re doing. Getting into hedge fund management is difficult to do for that reason. That’s not to say it’s impossible — but there just aren’t many people who have the ability.

So, no, in all likelihood, you’re not going to be making a billion per year. But you can dream, and if you are really serious about it, look further into a career in finance.

Follow Sam on Facebook and Twitter @SliceOfGinger

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