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Are They Worth It? Worth a Lot, but Are They Worth It? When Institutional Investor s Alpha magazine released its annual list of the highest paid hedge fund managers last month, it allowed the rest of us to play an entertaining little parlor game: what could you buy if you made as much money as those guys? James Simons, a 69-year-old mathematician who was at the top of the list, earned $1.7 billion, which equaled the amount of money that the federal government spent last year running its vast network of national parks. Down at No. 3 on the list, Edward S. Lampert of Greenwich, Conn.; the investor who owns a large chunk of Sears, made $1.3 billion, which, if you forget about taxes, would have allowed him to buy the entire economic output of Sierra Leone. We re talking about real money here. Today, Alpha magazine will release another big list; and this one offers a chance to answer another, arguably more important, question: Are these billionaire hedge fund managers really worth it? The reason hedge funds are a license to print money is their fee structure. A typical fund charges a 2 percent management fee, which means that it keeps 2 cents of every dollar that it manages, regardless of performance. Mutual funds, on average, charge about 1 percent. On top of the management fee, hedge funds also take a big cut-usually at least 20 percent-of any profits that exceed a predetermined benchmark. | 
