Add a new, and unexpected, voice to the chorus of those calling for more moderate compensation for hedge funds: the chairman of a hedge fund industry group.
Stanley Goldstein, chairman and founder of the New York Hedge Fund Roundtable, suggested that some sort of compensation cap for those employed at hedge funds could both improve the industry’s public standing and “deprive the media of a great punching bag they have.”
“I am a free-market economy, right-of-center Republican, and I resent how the liberals have used hedge funds as a punching bag,” Mr. Goldstein said.
Still, he concedes, “in some cases, they have a lot of ammunition.”
In a boom year, top-performing managers can walk away with billions in compensation, though hedge fund chiefs made an average of $2.6 million in 2009, according to AR magazine. But the outsized earnings at a time of high unemployment stoke the anger of many, and have done little for the image of hedge fund managers.
There is even a “green” element to the proposal, said Mr. Goldstein, who first aired his thoughts in a letter to the editor for Bloomberg Hedge Funds Brief.
“The paper saved by removing this topic from the fourth estate would preserve half the forests in Oregon,” he wrote.
Speaking with DealBook, Mr. Goldstein said that the compensation could work like this: Firms could arbitrarily cap earnings, then take half of anything earned in excess of that figure. The remainder of the money would be split evenly between other partners at the firm in their profit and loss ration and a bonus pool for all employees.
Mr. Goldstein figures this would also solve the problem of talent retention that dogs firms when compensation drops. Of course, selecting the appropriate arbitrary number for base earnings would be hugely important.
He said that number had to be “a lot less than what’s expected, otherwise it would be ridiculed.”
As for talent acquisition and retention, Mr. Goldstein said such programs have worked before. He also mused on the marginal value of making $50 million as opposed to $2 billion.
“How much better do you live with $2 billion than $50 million?” he asked.
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