Hedge fund manager Bill Ackman’s wildly over-the-top response to Joe Nocera’s critical column in last Saturday’s NYT (Felix has an excellent summary of the back and forth) got me thinking about the strange workings of the minds of the lavishly compensated. Ackman’s tone reminded me a lot of the air of aggrievement that pervades his friend and fellow hedge fund manager David Einhorn’s Fooling Some of the People All of the Time (which could be a truly great book if it weren’t so danged whiny). It also reminded me at least a little of the screed that my friend Cliff Asness (another big-time hedgie) wrote a few weeks back about President Obama’s attack on the hedge funds that owned Chrysler bonds and weren’t willing to go along with his rescue plan. (Cliff’s tone was more combative than whiny, and his essay displayed an actual sense of humor, so it’s not entirely fair to lump him in with Ackman and Einhorn. But I needed a third example to make my case, and Cliff more or less fits as he too was taking exaggerated umbrage with criticism.)
So here’s what I’m getting at (and I promise, no more parentheticals for the rest of this post): Hedge fund managers make tons and tons of money. That big money is supposed to incent them to dig into companies’ books and question management’s intentions and devise cool computer-driven investing strategies and stand up to President Obama and whatever the heck else they deem useful in the service of higher returns for their investors. Yet the money doesn’t seem to be doing it for them. These guys really want to be praised and honored for the good they do in the course of making all that money.
This just seems messed up. They get all that money! Shouldn’t they leave the praise and honor to those who are doing praiseworthy and honorable things and not making millions a year for it? Or maybe what Ackman and Einhorn and Asness are telling us is that it isn’t about the money. Those 2 and 20 hedge fund performance contracts (and the incentive-laden compensation plans at investment banks) are a total waste. All these guys want is a little pat on the back now then. Or maybe a cookie.