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The bucks stop here

Never have so few made so much so fast. Meet the highest-paid hedge fund managers in the world.

Could Harvard University be grossly underpaying certain of its employees?

No, we don't mean overburdened janitors or harried administrators or querulous English professors, but the bright investment managers who help to invest Harvard's $19.3 billion endowment for the Harvard Management Co. Last year David Mittelman, who runs domestic bonds, took home $36.8 million, and Maurice Samuels, who looks after foreign bonds, pocketed $35.6 million.

Their pay prompted cries of outrage among alumni, faculty and administrators. But Mittelman and Samuels may be the ones who have the real grievance over their compensation. They made far too little -- at least compared with the star hedge fund managers who appear in our third annual ranking of the top 25 earners in this ever-more-extraordinary industry.

The wealth being created by hedge fund managers is simply staggering. Just to make our list, you had to earn at least $65 million. Seventeen managers pulled down nine figures -- $100 million or more. Just seven did in 2002. The average take-home pay for the top 25 in 2003 was $207 million; for the top five, $506 million. And this, it should be emphasized, is real money, not options or restricted stock or a wealthy spouse.

Every era offers up its financial titans. They move from the private precincts of often-arcane finance into the hubbub of the public square, seizing headlines, and exciting the imagination of the masses before sometimes arousing their ire and turning from heroes to villains overnight. In the 1980s it was the corporate raiders and leveraged buyout artists who dominated the scene; in the 1990s it was the dot-comistas; today it's the turn of the hedge fund managers. Though still secretive at heart, they, like their predecessors, are moving steadily into the mainstream, redefining not only what it means to be rich but spreading their influence and power more widely. Many are emerging as important philanthropists and patrons of the arts and political movers and shakers. They appear prominently in society -- and not infrequently in the tabloids, too. As if to confirm their arrival at the center of power, government agencies are investigating them and debating increased regulation.

Then, of course, there is all that money. And what a hoard it is. Last year's average take-home of $207 million was nearly double that of 2002 ($110 million). The fattest pay packet -- $750 million -- went to a legend of the hedge fund world: 73-year-old George Soros of the Quantum Endowment Fund in New York City, who came in first two years ago with $700 million but fell off the list last year. In second place was David Tepper of Appaloosa Management in Chatham, New Jersey, with $510 million. Third was math whiz James Simons of East Setauket, New York­based Renaissance Technologies Corp., whose haul added up to $500 million and who has achieved a remarkable average annual return of about 38 percent since his firm's inception in 1988. Edward Lampert of Greenwich, Connecticut­based ESL Investments takes fourth, with $420 million, followed by SAC Capital Advisors' Steven Cohen and Caxton Associates' Bruce Kovner with $350 million apiece. Amazingly, though, for the last it was a bad year -- his worst investment performance in nearly a decade. (Profiles of all 25 winners with discussions of their strategies appear on the following pages. A box on page 50 discusses how past winners, who didn't make the list this time around, fared in '03.)

We'd be the first to acknowledge that determining how much the top hedge fund managers make is an inexact art. They are private and secretive, which means we must often estimate. Our formula for determining which hedge fund managers earn the most is based on two key factors: their share of the fees generated by the funds they manage as well as gains on their own capital in the funds. We arrived at these numbers based on our knowledge or estimates of the firms' capital at the beginning of the year, their performances, fee structures and managers' ownership stakes. We use publicly available sources as well as our Hedge Fund 100 ranking of the biggest hedge funds (Institutional Investor's Alpha, April/May 2004), which gives capital positions and fund performances, as well as our own reporting. Hedge fund managers overwhelmingly run private operations and guard their secrecy. In making our judgments, we try to choose conservative estimates.

To put high-end hedge fund managers' earnings in an appropriately quantitative framework: Soros last year made nearly 14 times as much as Citigroup chairman Sanford Weill (who earned $54 million, counting exercised options); roughly 35 times as much as Goldman Sachs Group CEO Henry Paulson ($21.4 million); 96 times as much as General Electric Co. CEO Jeffrey Immelt ($7.8 million); three and a half times as much as talk show host Oprah Winfrey ($210 million); five times as much as Harry Potter author J.K. Rowling ($147 million); and 1,923 times as much as President George W. Bush -- and Soros has a greater chance of keeping his day job.

THE HEDGE FUND MANAGERS ON OUR LIST SEEM to appreciate Margaret Thatcher's pragmatic perspective on charity: "No one would remember the Good Samaritan if he'd only had good intentions. He had money as well." Soros' foundation has given away $5 billion to date. Paul Tudor Jones II of Tudor Investment Corp. (No. 7 on our list, with $300 million) co-founded the Robin Hood Foundation, which funds and supports innovative poverty-fighting organizations in New York City, and has lately been spearheading the drive to build a $130 million basketball arena at his alma mater, the University of Virginia, donating $35 million. SAC Capital's Cohen is also active in the Robin Hood Foundation and announced a $15 million, three-year donation in late 2002.

Hedge fund managers crop up these days as trustees or directors of everything from the Chicago Public Library Foundation (Kenneth Griffin of Citadel Investment Group, No. 8 on our list, with $230 million) to Saint Barnabas Hospital (Leon Cooperman of Omega Advisors, No. 10, with $145 million) to Lincoln Center (Kovner is vice chairman of the board).

The managers' impulse is not always entirely altruistic. In the intermingled worlds of charity and society, supporting worthy causes can, of course, provide entrée to social circles. Like the ultrarich of every era, some hedge fund managers are social climbers who flaunt their wealth. As always, real estate is the supreme status symbol.

Hedge fund managers' hunt for trophy properties has become a distinctive factor in the Manhattan real estate market. "We're totally aware of it," says Pamela Liebman, CEO and president of the Corcoran Group, a New York City real estate broker. "Hedge funds are out in force and ready to spend. We've seen it in the past year and a half."

What are they looking for? So-called superluxury apartments and town houses that go for $10 million and up. "Had hedge funds not been in the market, the superluxury market would not be performing as well," confides Liebman. "For a while the dot-com guys were buying. The influx of hedge fund managers and other big names helped bring back the market and pushed prices up." Many hedge fund managers pay cash, she adds, and "the ones who don't pay cash are very good at arranging creative financing."

Hedge fund managers collect things other than performance fees and penthouses. A number are turning up as serious connoisseurs. SAC's Cohen, for instance, has been named by ARTnews magazine as one of the world's top ten art collectors for three years running.

Others prefer a different field. John Henry, who didn't make our list this year (he earned a mere $40 million) is one of the principal owners of the Boston Red Sox. Tudor Investments' James Pallotta (No. 15, with $110 million) was one of a group of investors that recently bought the Boston Celtics.

A number of hedge fundom's plutocrats are passionate about politics. Soros is the most conspicuous, and controversial, example. Late last year the Jewish immigrant from Hungary told the Washington Post: "When I hear Bush say, 'You're either with us or against us,' it reminds me of the Germans. My experiences under Nazi and Soviet rule have sensitized me."

Having declared that his "central focus" is to see the president thrown out of the White House, he has plunked down nearly $15 million to, among other things, register voters. He has also pledged up to $3 million to a liberal think tank headed by former president Bill Clinton's onetime chief of staff, John Podesta -- the Center for American Progress -- whose avowed aim is to counter the influence of conservatives.

That puts Soros squarely at odds with fellow hedge fund manager Kovner. In a kind of crude balance of political power among ultrarich hedge fund managers, the 59-year-old Kovner devotes his money and time strictly to causes on the right. He is on the board of the Manhattan Institute and is chairman of the American Enterprise Institute. In 2002 he helped found the right-leaning New York Sun newspaper. The ex­Harvard University political science professor is an impassioned champion of school choice and set up a foundation to provide scholarships for low-income students.

Soros, by the way, is by no means the only self-professed liberal Democrat among the hedge fund elite. Marc Lasry of New York­based Avenue Capital Group (No. 13, with $125 million), for instance, has been holding fundraising parties for Democratic presidential candidate John Kerry. But an informal poll reveals that the top hedge fund managers are breaking slightly in favor of Bush.

Hedge fund managers' growing celebrity has made them fodder for the tabloids. In January, ESL Investments' Lampert created a sensation when he tricked kidnappers into setting him free and then turned them into the police. And in recent months Zack Hamilton Bacon III, brother of Louis Bacon of Moore Capital (No. 17, with $100 million) and also a hedge fund manager, has become embroiled in a messy custody fight with Diandra Douglas, the ex-wife of actor Michael Douglas.

ON WALL STREET, WHERE YOU ARE WHAT YOU earn, hedge fund managers are the reigning royalty. Investment bankers dream of becoming hedge fund managers when they grow up (or get laid off).

Yet hedge fund managers' impact on the Street is considerably more tangible than that of just role models. Often hyperactive traders, they can literally move markets. SAC Capital's Cohen, a trader's trader, accounts for as much as 3 percent of the average daily trading volume on the Big Board, despite the firm's modest assets by institutional standards. Citadel's Griffin reckons that his $9.5 billion-in-assets multistrategy firm represents between 1 percent and 2 percent of daily dollar volume on the New York and Tokyo stock exchanges.

This kind of frenetic trading attracts investment banks as surely as thrashing about in the water brings sharks. The many hedge funds that engage in heavy trading are fat targets of investment banks and institutional brokerages selling so-called prime brokerage services, including loans.

But the most striking aspect of the hedge fund phenomenon is the extent to which funds are going mainstream. Until fairly recently, investors in hedge funds tended to be wealthy individuals and family offices. Now endowments and foundations have begun to shift a small amount of money into hedge funds, and more and more corporate and public pension funds are looking at this no-longer-exotic asset class as well.

Paradoxically, the very thing that institutional investors find most alluring about hedge funds -- their superior returns, or concentrated alpha -- may be compromised by those same institutions' actually investing in hedge funds. Call it the King Kong effect: hurting the thing you love. "Hedge fund managers have adapted to the risk profile of their investors instead of the other way around," explains Antoine Bernheim, who publishes hedgefundnews.com and the U.S. Offshore Funds Directory and has been advising hedge fund investors since 1984. "That's the key to building big businesses but not the key to superior performance."

If it's any consolation to investment bankers or Fortune 500 CEOs, hedge fund managers probably won't do as well in the wealth sweepstakes next year. Few of our top 25 are having a banner 2004; most funds are flat or up in the low- or mid-single digits. One top performer among them: Renaissance's Simons, whose Medallion Fund was up 21.6 percent gross through the end of June.

THREE QUARTERS OF A BILLION DOLLARS IS A helluva lot of money to make in a year (or a decade). Is the remuneration of top hedge fund managers capitalism at its best -- the pure, unencumbered expression of meritocracy in action? Or is it capitalism at its worst -- obscene excesses that distort the economy? That debate may be best left to those dueling think tanks sponsored by Soros and Kovner, respectively.

But what Harvard had to say in its latest alumni bulletin about the generous pay of its own hedge fund managers is instructive. Conceding that Harvard Management's compensation can be "indeed very high," the university nonetheless noted: "Over the past ten years, HMC's annualized return has exceeded the median return of large institutional funds by 6 percentage points. Had we performed at the median, our endowment would provide roughly half the income that it does today to support our faculty and students."

Lee Iacocca was once asked by a congressman to defend his $20.6 million in compensation for basically saving Chrysler Corp. from bankruptcy. "That's the American way," he said. "If little kids don't aspire to make money like I did, what the hell good is this country?" Only now kids don't aspire to run a car company; they aspire to run a hedge fund.

1. $750 MILLION

George Soros

SOROS FUND MANAGEMENT

He made $1 billion betting against the British pound in 1992, and he estimates that he has given away $5 billion to promote democracy around the world. Now Hungarian-born George Soros is wielding his power and his fat wallet to accomplish what he calls the "central focus" of his life -- pushing President George W. Bush out of the White House. Soros has contributed a total of $12.8 million, including $10 million to America Coming Together, an anti-Bush group that proposes to mobilize voters in 17 key states, $2.5 million to the MoveOn.org voter fund and $300,000 to the Campaign for America's Future. "America, under Bush, is a danger to the world," Soros, who launched the Quantum Fund in 1973, told the Washington Post late last year. "And I'm willing to put my money where my mouth is. When I hear Bush say, 'You're either with us or against us,' it reminds me of the Germans. My experiences under Nazi and Soviet rule have sensitized me." He also believes Bush's economic policies will boost the economy in 2004 but hurt it in 2005.

Soros isn't just annoying Republicans with his comments, though. Earlier this year the 73-year-old investor was pelted with mayonnaise in Ukraine by two youths who asserted that Soros was trying to stir up a revolution in their country.

Soros Fund Management is the principal advisor to the Quantum Group of Funds. Last year the Quantum Endowment Fund, where the Hungarian has stashed a big chunk of his net worth, finished the year up 14.8 percent after dropping by 1.72 percent the previous year, providing Soros with huge gains on his own capital. New York­based Soros Fund Management runs $8.3 billion in the Quantum Endowment Fund plus $4.5 billion in private equity, real estate and other investments. According to Securities and Exchange Commission filings, Soros Fund Management had nearly $1.7 billion scattered over 112 stocks at year-end 2003. The largest holdings: airline JetBlue Airways Corp., mortgage lender Federal Home Loan Mortgage Corp., energy companies Occidental Petroleum Corp. and Marathon Oil Corp. and medical equipment company Integra Lifesciences Holdings Corp.

In a bid to shore up management, Soros in April 2003 hired former Goldman, Sachs & Co. partner Jacob Goldfield -- the manager of New Jersey Democratic Senator Jon Corzine's blind trust -- as chief investment officer of Soros Fund Management. In early 2003 retired Goldman partner Mark Schwartz became president and chief executive officer.

2. $510 MILLION

David Tepper

APPALOOSA MANAGEMENT

Don't mistake volatility for risk-taking. So says Appaloosa Management's David Tepper. "We're not afraid of risk. We don't seek out risk. We reduce risk," the 46-year-old junk-bond specialist asserts, attributing his success to a lack of fear: "I don't know how you can really make money if you're not willing to lose money. That's what separates us from everyone else."

What separates Tepper's investors from everyone else is their willingness to hang on for the ride. In 2001 his Appaloosa Investment I fund surged 67 percent, then fell by 25 percent in 2002, only to rebound -- incredibly -- to a stunning 149 percent return in 2003. That's net of his 1 percent management fee and 20 percent incentive fee.

Despite their wild fluctuations, Tepper's funds have compounded at a 34.18 percent net annualized rate since he launched Appaloosa in 1993 after a three-year stint as head of junk-bond trading at Goldman, Sachs & Co. Last year the Appaloosa Management president thrived after catching the bottom in the distressed and junk-bond markets in the fall of 2002. His biggest winners: the bonds of Conseco, the former insurance highflier, and the debt of Marconi Corp., a U.K.-based telecommunications equipment maker.

These markets, he says, are now mostly played out, so in the fourth quarter of 2003 and first quarter of 2004, he started moving into metals and mining stocks as well as Japanese equities. He has continued to have a hot hand; each of his two funds was up 9 percent net through mid-June. Chatham, New Jersey­based Tepper, who returned about $1.3 billion to investors last year, including more than $800 million at year-end, had $2.8 billion under management at the end of 2003.

Tepper and wife Marlene recently gave $55 million to Carnegie Mellon University, where he earned his MBA in 1982 and which renamed its business school the David A. Tepper School of Business at Carnegie Mellon. The school plans to use $5 million to retain and attract professors and stash the rest in the business school's expanding endowment, which now stands at $137 million with the Teppers' gift.

3. $500 MILLION

James Simons

RENAISSANCE TECHNOLOGIES CORP.

Investors in James Simons' Medallion Fund saw their net returns dip last year to 21.9 percent from 25.8 percent. That, in part, was the price of success. Buoyed by his phenomenal long-term track record -- 38 percent net annually since 1988 -- Simons hiked his performance fee to a staggering 44 percent of profits from 36 percent in 2002 and a comparatively modest 20 percent in 2001. (His equally stunning 5 percent management fee didn't change.) That means that Simons' gross returns in 2003 were a nifty 39 percent. Simons' East Setauket, New York­based Renaissance Technologies Corp., which has employed sophisticated mathematical models to outperform rivals for the past decade, ran $5 billion at year-end 2003; that's after giving back all of 2003's first-half gains last July. Simons subsequently returned all second-half gains as well as some of the capital of nonemployees in January 2004 and has committed to returning all of this year's first-half gains of Medallion, its only fund. In a tough year for hedge funds, Simons continues to shine: He's up 22 percent gross through May.

Last year the offshore fund, which closed to new investors in 1993, scaled back its equity portfolio; it had about $8.2 billion spread over 1,387 stocks at year-end, compared with more than $12.3 billion the year before. Its largest holdings: biotechnology company Amgen, packaged foods business General Mills, drugmaker Merck & Co., gold producer Newmont Mining Corp., defense contractor Northrop Grumman Corp. and financial services giant Washington Mutual.

Simons, 66, a onetime chairman of the mathematics department at the State University of New York in Stony Brook, began his working life as a cryptanalyst at the Institute for Defense Analyses in Princeton, New Jersey, and taught mathematics at Massachusetts Institute of Technology and Harvard University. He is legendary for shunning Wall Street types in favor of individuals who do "good science."

An entrepreneur -- as well as an investor -- Simons is chairman of Segue Software and Franklin Electronic Publisher. He is also a founder and director of the Sanford Group, an industrial holding company in South America. He retired from the board of embattled Symbol Technologies earlier this year.

Simons holds a BS from MIT and a Ph.D. from University of California at Berkeley and was the winner of the American Mathematical Society Oswald Veblen Prize in Geometry in 1976. His scientific work was in the area of geometry and topology. Simons' most influential work involved the discovery and application of certain measurements, now called the Chern-Simons invariants. These are widely used, particularly in theoretical physics.

4. $420 MILLION

Edward Lampert

ESL INVESTMENTS

A year that began in near tragedy ended in stunning triumph for Eddie Lampert. In January 2003 the Greenwich, Connecticut­based billionaire investor was kidnapped and held at gunpoint in a motel for two days, until he convinced his captors to let him go in return for a ransom of $40,000 that he promised to leave in a trash can. Once released, Lampert reported the incident to the Federal Bureau of Investigation. Four of his abductors were caught; one was recently sentenced to 15 years in prison for the kidnapping and another, unrelated, crime; the others await sentencing.

Lampert, the managing member of ESL Investments, is known for making very big bets on a small number of companies; he parlayed heavy wagers on discounting giants Kmart Holding Corp. and Sears, Roebuck & Co. into massive gains last year. From the time Kmart issued new shares as part of a recapitalization last spring through year-end, its stock gained 60 percent, raising Lampert's stake to $959 million. Lampert, who as the biggest shareholder became chairman of the discounter, has since seen his shares more than double. His $672 million investment in Sears also doubled -- to $1.4 billion last year (the stock fell 15 percent through March). Meanwhile, an older stake in AutoNation surged 46 percent, even as his investment in AutoZone -- ESL sold about 20 percent of its shares last year -- climbed 21 percent on average.

Not that everything Lampert touched turned to gold. Lampert -- whose clients reportedly include the Ziff publishing family, Hollywood mogul David Geffen and computer king Michael Dell -- recently filed an amended report with the Securities and Exchange Commission noting that a $200 million investment in Safeway finished last year essentially flat. Alas, a small 2.6 million share stake in Footstar, a shoe retailer, fell 45 percent in value, to $10.2 million, last year.

The 41-year-old graduated summa cum laude from Yale University in 1984 with a bachelor's degree in economics before joining Goldman, Sachs & Co. as an arbitrageur.

5. $350 MILLION

Steven Cohen

SAC CAPITAL ADVISORS

Renowned for his frenetic buying and selling, Stevie Cohen embraces most trading strategies, but last year his below-par 18 percent return -- a composite of all of his hedge funds net of his performance fee, which stunningly averages slightly less than 50 percent -- was mostly driven by the firm's long-short equity strategies. Other key contributors to Cohen's worst performance in nine years included corporate credit trading strategies, quantitative strategies and global macro trading strategies. At year-end the trader legendary for generating as much as 3 percent of the Big Board's average daily volume had a $3.2 billion equity-oriented portfolio spread over 1,048 issues. Stamford, Connecticut­based SAC Capital Advisors' top five equity holdings -- specialty drugmaker Medicis Pharmaceutical Corp., media giant Viacom, medical-equipment makers Boston Scientific Corp. and Inamed Corp. and supermarket behemoth Safeway -- were either sold completely or scaled back by the end of the first quarter of 2004 when the equity portfolio was more than doubled, to $6.57 billion, spread over 1,509 issues. At the end of 2003, the 48-year-old, who is a graduate of the University of Pennsylvania's Wharton School, owned preferred securities of seven companies, including auto giant General Motors Corp. Cohen also hedged his portfolio with puts in 15 issues, including telecommunications equipment maker UTStarcom, his largest put position, as well as GM and telecom giant Verizon Communications.

A generous philanthropist -- on his own and through the Steven and Alexandra Cohen Foundation -- Cohen is active in both the Michael J. Fox Foundation and Robin Hood Foundation. In December 2002 he announced a three-year, $15 million donation to Robin Hood, on whose board his second wife, Alexandra Cohen, sits. Between 1999 and 2000, Cohen and his wife raised about $6 million for the New Hyde Park, New York­based Schneider Children's Hospital, primarily through two events that the couple sponsored and for which they personally paid approximately $1 million to cover all costs. For the past three years, Cohen has been named one of ARTnews magazine's top ten collectors.

5. $350 MILLION

Bruce Kovner

CAXTON ASSOCIATES

When is a $350 million payday a disappointment? When your name is Bruce Kovner and your Caxton Associates managed $11.5 billion at year-end 2003 to rank No. 1 among the world's biggest hedge fund organizations. Last year Kovner's 8.1 percent net return was his worst in about a decade, as gains in commodities, currencies, financial instruments and stocks were offset by modest energy trading losses, according to his year-end economic report. Over two decades in the business, Kovner, 59, can still boast a net annualized return of about 30 percent since his firm's inception in 1983.

Ironically, the global macro trader last year increased his fees to investors, boosting his management fee from 2 percent to 3 percent and his incentive fee from 25 percent to 30 percent in offshore fund Caxton Global Investments. At year-end Caxton Global returned 20 percent of investors' capital, reducing the firm's single-manager funds to $9.5 billion, mostly because he felt the fund had grown too large to maintain its historical rate of return. So far it hasn't made much difference, as Caxton Global was up only 3.4 percent net through mid-June.

Last December, according to a Securities and Exchange Commission filing, Kovner held the biggest positions in his $3.15 billion equity-oriented portfolio in insurer Conseco, health insurers Mid-Atlantic Medical Services and WellPoint Health Networks and financial services giants FleetBoston Financial Corp. and John Hancock Financial Services, which were subsequently acquired. Kovner also held long positions and puts in exchange-traded funds -- such as the Ishares Trust that tracks the Russell 2000 -- and shares, puts and calls in the Nasdaq 100 Trust. Kovner also paired common shares and puts in a number of companies, including computer graphics company Intergraph Corp., defense contractor Lockheed Martin Corp. and Internet media company Yahoo.

A major financier of the neoconservative movement, Kovner, whose net worth Forbes recently estimated at $1.4 billion, helped fund the upstart New York Sun, where daughter Rachel was a reporter. Kovner is chairman of the American Enterprise Institute and founder and chairman of the School Choice Scholarships Foundation, which provides scholarships to low-income students from New York City to attend primary schools of their choice. He is chairman of the Juilliard School and vice chairman of Lincoln Center for the Performing Arts. Kovner also sits on the board of the Foundation for Education Reform and Accountability, which supports "educational innovation," including charter schools, single-sex public schools and new approaches to teacher work rules.

7. $300 MILLION

Paul Tudor Jones II

TUDOR INVESTMENT CORP.

When the University of Virginia's new John Paul Jones basketball arena opens in 2006, casual visitors may assume it was named for the Revolutionary War hero John Paul Jones. In truth, the new basketball venue will be named for the father of Paul Tudor Jones II, who has put up $35 million of the project's $129.8 million price and spearheaded its development. "It's payback time for his being a great father," Jones, 49, told the University of Virginia News. Jones, like his father a UVA graduate, added that his father's life has been dedicated primarily to four things: his faith, his family, his alma mater and basketball.

This is Jones's first nonacademic gift to the university, where he earned an economics degree in 1976. He previously donated $10 million to help fund the expansion of Clark Hall, where the environmental sciences department is housed. He also endowed a research professorship shared by the Darden Graduate School of Business Administration and the McIntire School of Commerce.

Jones can afford to be generous. Last year his multistrategy fund, the Tudor BVI Global Portfolio, which had $3.7 billion at year-end, returned 16.75 percent, net of its 4 percent management fee and 23 percent performance fee -- its third straight double-digit return. It hasn't suffered a down year on the way to racking up a 26 percent net annualized return since its launch in 1986. Last year BVI made its biggest money trading commodities, fixed-income and currencies. BVI doesn't break out the performance of its fund's equity component, but Tudor's equity-only portfolio, Raptor Global fund, which is also run by James Pallotta, was up 15.5 percent, net of fees.

Tudor, which ran $7.8 billion in hedge fund assets at year-end, is in the process of opening a new office in Asia to add to its Greenwich, Connecticut, headquarters and offices in Boston, Washington, London and Surrey, England.

8. $230 MILLION

Kenneth Griffin

CITADEL INVESTMENT GROUP

Ken Griffin first got the urge to become a professional investor while reading a Forbes magazine article about the case for shorting Home Shopping Network shares when he was a Harvard College undergraduate. Not long after he rigged a satellite dish to his dorm room window to get real-time stock quotes, and by the time he graduated, in 1989, he had developed his first convertible bond arbitrage model. Today Griffin, 35, employs about 750 staffers in five offices -- home base Chicago, San Francisco, London, Tokyo and New York -- and manages $9.5 billion as of year-end 2003.

The self-taught quant and convertibles expert certainly is not shy about pumping up that balance sheet when he sees an opportunity. The manager of five hedge funds, including the well-known Wellington Partners and Kensington Global Strategies, used leverage to double his equity position by year-end to $16 billion, spread over 2,824 individual issues. Two of his biggest stakes were merger arbitrage positions -- $384 million in FleetBoston Financial Corp., the banking giant that agreed to be bought by Bank of America Corp. in October 2003 for $47 billion, and $220 million in John Hancock Financial Services, the financial services giant that last September agreed to be taken over by Manulife Financial Corp. for $10.4 billion. Griffin's single biggest equity position was a $377 million stake in HMO WellPoint Health Networks. Other top year-end stakes included drug makers Amgen and Pfizer as well as PG&E Corp. Citadel owned a $113 million equity position and a $613 million convertible bond stake in the embattled utility. The firm estimates that it accounts for 1 percent to 2 percent of the combined total daily dollar volume traded on the New York and Tokyo stock exchanges.

Last year long-short equity, fixed-income, convertible-bond arbitrage and distressed securities played a big role in Kensington's 9.9 percent net return and Wellington's 13.3 percent net return. Those numbers reflect a comedown; Wellington has compounded at an average of about 28 percent net per year since Griffin started the firm in 1991, after a brief stint as a convertible-arb trader at Chicago-based alternative-investment firm Glenwood Investment Corp.

The Harvard economics grad sits on the board of the Chicago Public Education Fund, is a member of the board of trustees of Chicago's Museum of Contemporary Art and is a director of the Chicago Public Library Foundation. He and his wife, Anne Dias, were named this year to ARTnews magazine's list of top ten collectors.

9. $150 MILLION

Daniel Och

OCH-ZIFF CAPITAL MANAGEMENT GROUP

Multistrategist Daniel Och rebounded nicely from 2002, when most of his funds lost money. His biggest fund, the $5.9 billion OZ Master Fund, which fell by more than 1 percent in 2002, parlayed investments in merger arbitrage, convertible arbitrage, distressed securities and long-short equity special situations into a return of 24 percent, net of its 1.5 percent management fee and 20 percent performance fee. Overall, New York­based Och-Ziff Capital Management Group has returned 18.16 percent annually since 1994.

Och, 43, fared especially well playing U.S. and European equity restructurings as well as distressed credits. At year-end his nearly $2.3 billion equity portfolio was spread over 129 issues. By far the largest stakes were in Dade Behring Holdings, a Deerfield, Illinois­based company that makes and markets in vitro diagnostics products and services to clinical laboratories, and CapitalSource, a Chevy Chase, Maryland­based diversified, closed-end management finance company. Earlier this year Och-Ziff was one of a handful of high-profile funds that invested in the $1.35 billion purchase of SafeCo Corp.'s life insurance and investments business as part of a consortium led by White Mountains Insurance Group and Warren Buffett's Berkshire Hathaway.

With $8 billion under management at year-end 2003 -- up $1 billion from the year before -- ten-year-old Och-Ziff ranks 11th among the world's biggest hedge fund firms. Continuing to push for growth, the firm last year launched the OZ Real Estate Opportunities Fund as a separate investment fund that is managed by Stavros Galiotos and Steven Orbuch, two former managing directors from Blackstone Real Estate Fund. It will focus primarily on real estate and real estate­related opportunities in the U.S. To address the critical issue of recruiting and retaining key professionals, Och, the firm's senior managing member, recently created a new principal designation, granting equity to 11 top employees; they share the action of 12 current partners. The move rewarded analysts, traders, financial risk managers and even senior back-office staff.

Before founding Och-Ziff Capital Management Group in partnership with Ziff Brothers Investments, Och was co-head of U.S.-listed equities at Goldman, Sachs & Co. and managed that firm's proprietary activities in the area. An active supporter of the University of Pennsylvania, where he received a BS in finance from the Wharton School in 1982, Och is chairman of the Wall Street division of the United Jewish Appeal-Federation and served as co-chair of this year's annual Robin Hood Foundation dinner.

10. $145 MILLION

Leon Cooperman

OMEGA ADVISORS

Talk about a turnaround. After dropping by 11 percent in 2002, Leon Cooperman's Omega Advisors roared back last year with a 50 percent return, net of his 1 percent management fee and 20 percent performance fee. The 38-year Wall Street veteran, who was running $2.8 billion at year-end 2003, made his money across a broad range of investments -- though Cooperman mostly avoided such volatile sectors as technology, telecommunications and biotechnology stocks. Leading the way among profit makers last year were AES Corp., a global power company primarily engaged in owning and operating electric power generation and distribution businesses throughout the world; Cendant Corp., a provider of travel and real estate services; Freeport McMoRan Copper & Gold, a copper- and gold-mining company; Allstream, a communications solutions provider; Tyco International, a conglomerate; Westar Energy, an electric utility based in Kansas; and Oxford Health Plans, a health care company. Cooperman also cashed in on WorldCom debt holdings. Positions in AES and Tyco were his two worst performers in 2002.

Altogether his long equity positions kicked in more than 52 percentage points to his return, while short equity-index-option positions cut his return by nearly 2 percentage points. High-yield or distressed debt positions added 7 percentage points, and macro positions -- mostly a long position in the Nikkei 225 index -- added a little more than 1 percentage point.

Cooperman, 61, who earned an MBA from Columbia University, worked for Goldman, Sachs & Co. for 25 years, eventually becoming chairman and chief executive officer of Goldman Sachs Asset Management. For nine consecutive years he was voted the No. 1 portfolio strategist in the Institutional Investor All-America Research Team survey. In 1991 he left Goldman to found New York­based Omega Advisors.

Cooperman is active in civics as a trustee of Saint Barnabas Hospital, a member of the board of directors of the Cancer Research Fund and a member of the investment committee of the Museum of Modern Art.

11. $135 MILLION

Mark Kingdon

KINGDON CAPITAL MANAGEMENT

Long-short specialist Mark Kingdon turned his fortunes around in style in 2003. After two straight losing years that saw his assets plunge from $4.5 billion in 2000 to $1.7 billion in March 2003, his four main funds surged about 35 percent net of fees, with all 13 of his portfolio managers recording gains. The rebound helped bring assets back up to about $3.1 billion by June 2004. Kingdon, who layers a small macro component into his classic long-short investing style, can boast a remarkable record of 21 percent net annualized returns since he opened for business in 1983.

Kingdon, who serves as his firm's chief portfolio manager and strategist, benefited from a timely decision to increase his net equity exposure in March 2003, focusing on early-cycle areas of strength such as technology and telecommunications stocks as well as cyclicals, like heavy-machinery maker Caterpillar and auto giant General Motors Corp. Responding to the China-led, demand-driven bull market, Kingdon also increased his exposure to Asia in early 2003; he committed funds to India before the market's rise, making his biggest money on Indian banks and software stocks. He then correctly pulled out of India, anticipating that market's meltdown in 2004. The firm also took nice profits in Hong Kong, Japan and Singapore.

Before founding Kingdon Capital, the 55-year-old investor was a general partner with New York­based Century Capital Associates, an institutional asset management firm. From 1973 to 1975 he was a pension fund administrator for American Telephone & Telegraph Co. Kingdon, who was born in Brooklyn but raised in the upscale Long Island community of Roslyn, received his BA in economics Phi Beta Kappa from Columbia College in 1971 and an MBA from Harvard Business School in 1973. He serves on the boards of Columbia University, the Harlem Children's Zone, the New York City Police Foundation and the Academy of Political Science.

12. $128 MILLION

Israel Englander

MILLENNIUM PARTNERS

Supersecretive Izzy Englander was unexpectedly thrust into the spotlight last year when one of his traders -- Steven Markovitz -- became one of the first individuals from a hedge fund firm to plead guilty for his role in the mutual funds late-trading scandal. Managing partner Englander himself wasn't implicated, but Millennium Partners has reportedly received a subpoena related to its trading practices from New York State Attorney General Eliot Spitzer and the Securities and Exchange Commission. Investors reportedly yanked out $700 million from the funds -- Millennium International and Millennium USA -- which together had $4.3 billion under management at year-end. Millennium's investors reportedly include insurance company CNA Financial Corp. and Evaluation Associates. In March, Millennium Partners set aside 10 percent of its capital in preparation for a possible settlement with federal or state regulators. The firm also named Simon Lorne, a former SEC general counsel, as vice chairman and chief legal officer.

Investors looking at the bottom line, however, are not complaining. Last year New York­based Englander's multistrategy hedge funds finished up 11 percent, extending a string of gains since the late 1990s market bubble popped. His funds rose on average by 9.6 percent in 2002, 15.6 percent in 2001 and 30.7 percent in 2000. In 2003 no single strategy played a significant role for Englander, who strives to minimize his losses.

In 1977, Englander, now 55, teamed up with Stephen Tobias to create Israel A. Englander & Co., an options, floor bokerage and trading firm. During the 1980s, Englander was a partner in arbitrage firm Jamie Securities with controversial trading legend John Mulheren, who died late last year.

13. $125 MILLION

Marc Lasry

AVENUE CAPITAL GROUP

Bad news has been very good for Marc Lasry, who has turned the netherworld of distressed and troubled companies into a gold mine. Lasry, who started New York­based Avenue Capital Group with his attorney sister, Sonia Gardner, in 1995, ran about $5.5 billion at year-end 2003, including roughly $2.7 billion in four hedge funds. The Avenue International offshore fund -- the firm's biggest, with $1.15 billion -- finished the year up 27.1 percent, net of Lasry's 2 percent management fee and 20 percent performance fee.

Lasry, who prefers to invest in senior debt, rode the upswing in the distressed markets through stakes in a number of struggling media companies, including embattled cable companies Adelphia Communications Corp. and Charter Communications, as well as independent power producers and oil and gas companies. In Asia, where he runs more than $1.1 billion, he made winning bets on the bank debt of infrastructure companies, such as cement, telecommunications and paper, for a gain of 19.3 percent on his $707 million Avenue Asia International offshore fund and a 22.5 percent increase in his $423 million domestic partnership, Avenue Asia Investments.

Lasry, 44, has spent his entire career in debt, so to speak. After graduating New York University School of Law, he clerked for Edward Ryan, then chief judge of the U.S. Bankruptcy Court for the Southern District of New York. He specialized in bankruptcy law at the New York law firm of Angel & Frankel, then shifted to distressed-securities investment house R.D. Smith (now called Smith Vasiliou Management Co.). After a stint at Cowen & Co., where he was co-director of bankruptcy and corporate reorganization, in 1988 he founded Amroc Investments, whose general partners included Acadia Partners, American Express Co., the Equitable Life Assurance Society of America and Keystone (an investment partnership firm that was affiliated with the Robert M. Bass Group). In 1995, Lasry started Avenue.

A native of Marrakech who grew up in Hartford, Connecticut, Lasry played Division III basketball as a freshman at Clark University, where he earned a BA in history in 1981. Clark's Center for Holocaust and Genocide Studies is quartered in the Lasry-Cohen House. (Lasry and his wife, Cathy Cohen-Lasry, a 1983 graduate, donated an undisclosed amount to the university.) An active Democrat, Lasry has been holding fundraisers in his Manhattan home for presidential hopeful John Kerry. (Sister Sonia, who manages the firm and acts as general counsel, took home an estimated $20 million last year.)

14. $120 MILLION

D. Keith Campbell

CAMPBELL & CO.

Keith Campbell got into commodities trading by accident in the 1960s when he decided to settle in California, where he could surf -- and ski -- according to the recently published Trend Following: How Great Traders Make Millions in Up or Down Markets, by Michael Covel (Financial Times/Prentice Hall). Looking for a roommate, Covel relates, Campbell placed a newspaper ad and wound up with a commodities broker named Chet Conrad, who introduced him to trading as a customer. The rest is history.

Campbell organized his first partnership in 1974, forming Campbell & Co. in 1978, and becoming a registered commodity pool operator in 1982. Last year Campbell's largest portfolio, the Financial, Metal & Energy Large Portfolio, recorded a 20.41 percent gain, net of its management fee and 20 percent performance fee. Since its 1983 inception the portfolio has compounded at a 15.43 percent net annualized rate. As of May 2004 currencies made up the largest portion of the portfolio, followed by long-term interest rate plays. Campbell's Financial, Metal & Energy Small (above $5 million) Portfolio finished last year up 18.45 percent; the Global Diversified Large Portfolio climbed 18.82 percent; and the Foreign Exchange Portfolio surged by 38.82 percent. The firm's composite return in 2003 was 20.62 percent.

Like most commodity trading advisers, Campbell & Co., which uses trend-following methods to run a little more than $6 billion in six portfolios, has branched out into many other investments, including stocks. The firm's proprietary trading models are "designed to detect and exploit medium- to long-term price changes, while also applying proven risk management and portfolio management principles," according to the Towson, Maryland­based company's Web site, which notes that no one market exceeds 15 percent of a total portfolio's allocation.

Campbell, who turns 62 this year, has served as chairman of Campbell & Co. since it began operations and was president until 1994 and CEO until 1997. He is the firm's majority voting stockholder and has acted as a CTA since 1972.

15. $110 MILLION

Raymond Dalio

BRIDGEWATER ASSOCIATES

Macro specialist Raymond Dalio is not a typical hedge fund manager. His $8 billion, 15-year-old Bridgewater Pure Alpha strategy is just a small -- albeit exceedingly profitable -- part of his Westport, Connecticut, money management firm, Bridgewater Associates, which currently manages $74 billion (up from $55 billion at year-end). All of his hedge fund's investors are pension funds, endowments, foundations, central banks or funds of funds. Unusual for a diversified global macro trader, Dalio, 54, who serves as president and chief investment officer, doesn't make big leveraged or big concentrated bets. "We create diversity by combining many different return streams," he recently told a gathering of the Greenwich Roundtable, a nonprofit educational organization for investors who allocate capital to alternative investments. "The key to successful investing is finding 15 good, uncorrelated return streams. Diverse return streams reduce your risk by 80 percent. Diversity increases the consistency of your returns."

Last year Bridgewater Pure Alpha racked up a 23.3 percent return, mostly from strong gains in the currency and bond markets. Dalio was short the dollar against a number of currencies. He was also long the yen versus the euro and long the Canadian and Australian dollars versus the euro and yen. In the bond market Dalio was mostly short, although he was long euro bonds versus U.S. bonds. He also went long inflation-indexed bonds and made some money going long gold, oil and other commodities via the futures market.

After graduating from Harvard Business School in 1973 with an MBA in finance, Dalio spent several months as director of commodities at the Wall Street brokerage firm Dominick & Dominick before joining Shearson Hayden Stone as head of its institutional futures department. In 1975 he launched Bridgewater, initially as a specialist in interest rate and currency risk management for corporations. He began managing credit market and currency exposures for institutional investors in 1985, when global investing became more popular. Dalio sits on the boards of the China Care Foundation, which seeks to help Chinese orphans and American adopting families, as well as the Dalio Family Foundation.

15. $110 MILLION

James Pallotta

TUDOR INVESTMENT CORP.

Even a trading virtuoso like Paul Tudor Jones II can use a helping hand, and last year James Pallotta, Tudor Investment Corp.'s equity guru, gave him one, recording a 15.5 percent gain on his $3.8 billion Raptor Global Portfolio. It marked his best year since 1999, when he racked up a stunning 92 percent return. Like most long-short equity managers, the 46-year-old Tudor managing director made money on his longs and lost money on his shorts. The Boston-based Pallotta's best performers included bets on media giant Time Warner, retailer J.C. Penney Co., drugmaker Forest Laboratories, insurer Aetna, gaming machine maker International Game Technology and energy giant Williams Cos. Pallotta altogether runs $6 billion in equities, including a big chunk of money for Jones's multistrategy Tudor BVI Global Portfolio, in addition to partners' capital. Raptor rose 2.6 percent in 2000, fell 2.9 percent in 2001 and climbed 6.1 percent in 2002.

At year-end he had $5.9 billion scattered over 221 positions. By

far his biggest holdings were (in order of size) tobacco and food giant Altria Group, media company Time Warner, financial services company Prudential Financial and drugmaker Forest Laboratories.

A philanthropist and rock music fan, Pallotta, a 1979 finance graduate of University of Massachusetts­ Amherst, received an MBA in accounting from Northeastern University in 1981. A part-owner of the Boston Celtics, he made a minor splash last year at a fundraiser hosted by close friend and former Boston Bruins star Cam Neely, when he reportedly helped bid up the auction prices for two guitars donated by members of the band Aerosmith to $62,000 and for a lot of rare white wines to $30,000 (they had an estimated value of $3,000). Pallotta did not walk away with either.

Pallotta is active in a number of Massachusetts-based charities geared toward children. They include Lovelane, which offers personalized horseback riding therapy, especially to those with cancer or multiple sclerosis; SquashBusters, which provides academic tutoring, mentoring, community service and squash instruction and competition for middle- and high-school students; and Year Up, which provides urban young adults with technology-related skills and helps them earn college credits and obtain paid corporate internships.

17. $100 MILLION

Louis Bacon

MOORE CAPITAL MANAGEMENT

Rebounding from a losing 2002, Moore Capital Management's Louis Bacon steered his largest fund -- Moore Global Investments, a $3 billion macro fund -- to a 34.2 percent return, net of his 1 percent management fee and 20 percent performance fee. Bacon, who ran $6.1 billion in hedge fund assets at year-end 2003, racked up a 15.5 percent return in his $2.1 billion Moore Global Fixed Income Fund. His best-performing fund, however, was the $600 million Remington Investment Strategies, which netted 34.9 percent. The private, 49-year-old North Carolina native seemed to gradually warm up to equities throughout the year, reporting about $1.25 billion in equity-oriented investments at year-end, compared with just $174.5 million on December 31, 2002, according to Securities and Exchange Commission filings. Bacon also hedged his technology-related stock holdings, buying puts to offset common-stock stakes in Applied Materials, Ask Jeeves, Best Buy Co., Dell, LM Ericsson Telephone, Intel Corp., Nextel Communications, Qualcomm, Teradyne and Xilinx. In expansion mode, he recently launched Moore Credit Fund, a global debt vehicle managed by bond trader Timothy Leslie out of his London office, and more than a year ago held a final close on its second Japanese distressed fund, called Moore SVP (Strategic Value Partners).

For all the expansion, New York­ based Bacon has been returning money to investors. Moore had its fifth straight year of mandatory net redemptions in its macro program in 2003; Bacon's aim is to keep assets down, to stay nimble. In March the firm distributed $450 million -- the most recent year's profits -- from Moore Global Fixed Income Fund. It marked the first time in the ten-year history of that fund that Moore, founded in 1989, returned money.

18. $95 MILLION

Richard Perry

PERRY CAPITAL

Hot deal market or cold, Richard Perry, the event-driven arbitrage specialist, just keeps making money. In 2003, Perry Partners and its offshore equivalent each produced returns of about 23 percent, the 11th double-digit return in his 15 full years managing the funds following his departure from Goldman, Sachs & Co. in 1988. During that time, Perry has racked up a 16.15 percent annualized return.

The secretive 49-year-old, who managed $6.1 billion at year-end 2003, did especially well early in the year in distressed securities and the rest of the year investing in U.S. and European equities. At year-end he had more than $4.7 billion in equity-oriented investments. His largest holdings: utility PG&E Corp., health insurer Anthem, title insurer Fidelity National Financial, drugmaker Pfizer and oil field services and infrastructure company Halliburton Co. Among his positions were a number of trades in which he simultaneously owned long positions and puts in consumer lender Accredited Home Lenders Holding Co., retailer Gap and electric utility Teco Energy. He also owned the common stock as well as calls in a number of other stocks, including financial services firm Knight Trading Group, software maker Microsoft Corp., insurer Platinum Underwriters Holdings, banking giant Wells Fargo & Co. and drugmaker Wyeth. Perry had additional positions in calls and puts in media giant Cox Communications, automaker General Motors Corp. and airline company UAL Corp.; he owned common stock, calls and puts in telecommunications giant AT&T Corp., airline Delta Air Lines and conglomerate Tyco International.

Not all is happiness and light, however. In May 2003, Perry, who holds a BA from the University of Pennsylvania's Wharton School and an MBA from New York University Stern School of Business, shut down his $1 billion European hedge funds after their lead manager, Christopher Hohn, left to launch his own operation. Perry Capital called the closing a natural evolution, saying the investing opportunity no longer existed.

Perry also runs a successful private equity operation -- Perry Strategic Capital. Earlier this year it made a big profit when FTD, a flower marketer, was sold to buyout firm Leonard Green & Partners for about $420 million. New York­based Perry Capital and Boston-based Bain Capital had controlled FTD since December 1994, when they bought it for about $130 million. At one point, Perry had installed current EBay chairman Margaret Whitman as CEO. In December 2003, through a newly formed acquisition vehicle named PAV Republic, Perry bought substantially all the assets of Republic Engineered Products LLC, an Akron, Ohio, specialty steelmaker, for $277.5 million, renaming it Republic Engineered Products Inc. Perry is a member of the boards of trustees of the Allen-Stevenson School, the Milton Academy, the Harlem Children's Zone and Facing History and Ourselves, a national educational organization whose mission is to engage students of diverse backgrounds in civic education to combat prejudice. He is also a member of the Wharton Undergraduate Executive Board.

18. $95 MILLION

Thomas Steyer

FARALLON CAPITAL MANAGEMENT

The strong market for distressed securities helped Farallon Capital Management's hedge funds surge by more than 22 percent on average as total assets climbed to nearly $10 billion, good enough to remain fourth at year-end among the world's biggest single-manager funds. Farallon's performance mostly benefited from credit-related investments, restructuring and value plays, both long and short. The London and Singapore operations of the San Francisco­based firm made significant contributions. Farallon's biggest single gain came from its stake in CapitalSource, a Chevy Chase, Maryland­

based diversified, closed-end management finance company that was created in 2000 and went public last summer, with Farallon as its first and largest investor and with senior managing member Thomas Steyer on its board. After the stock went public in August at 14.50, Farallon owned about 26 percent -- or nearly 30 million -- of outstanding shares. They closed at 18.30 on the first day of trading and finished the year at 21.68, valuing Farallon's holdings at $540 million -- a 50 percent gain.

Lately, Steyer, 46, has been sharing the wealth. In 2003 he added four partners and four managing directors and now has 15 partners with ten or more years with Farallon.

Farallon's blue-chip clients include the California Public Employees' Retirement System and a number of major colleges and universities, including Duke University, Michigan State University, University of Pennsylvania, Princeton University, Stanford University and Steyer's alma mater, Yale University (Endowment and Pension). Recently, his college ties have come back to haunt him with a vengeance, with a coalition of national and campus-based organizations agitating against the fund. They've created a Web site, www.unfarallon.info, and urged Farallon to disclose more information about the environmental record of its investments. Steyer, who earned a BA in political science and economics from Yale and an MBA from Stanford, has sent a letter to the group, stating in part, "We do believe that our role in allocating capital contributes to economic growth in communities around the world, which in turn improves long-term social and environmental conditions." In a March letter to shareholders, Steyer noted: "We are proud of the work we have done and continue to do for universities and appreciate the importance of the issues you raise -- even as we have strong disagreements with you on the facts about our investments and the conclusions you draw."

20. $92 MILLION

Kenneth Tropin

GRAHAM CAPITAL MANAGEMENT

Trend follower Kenneth Tropin, chairman of Graham Capital Management, which has $4.6 billion in nominal capital, continued to shrewdly anticipate the markets' moves last year, with all five of his major programs posting gains, led by three that recorded double-digit advances: Graham Global Investment Fund-K4 Portfolio, up 21.6 percent; Graham Global Investment Fund-GST Portfolio, up 18.5 percent; and Graham Global Investment Fund-K5 Portfolio, up 13.7 percent. All of the funds use a similar style of directional trading and have similar portfolios. They are differentiated by the formulas used for deciding when to buy and sell.

Tropin, who charges a 3 percent management fee and 20 percent performance fee, fared well playing stock index futures, as most global markets rallied; fixed income, especially long bonds, also contributed, particularly in the fourth quarter. His big plays, however, were in currency trading, which accounted for one third of the firm's risk allocation but produced 55 percent of its gains. Among big winners, he shorted the U.S. dollar versus the euro and other European currencies and went long the Australian dollar, Canadian dollar and Japanese yen versus the U.S. dollar. Always looking to diversify, Tropin, 50, deploys 35 trading programs outside his core trend-following strategies, 15 of which specialize in macro trading. Last year Tropin -- a 1974 graduate of Vermont's Goddard College, where he majored in sculpture -- moved Graham's office from Stamford, Connecticut, north about seven miles to Rowayton, Connecticut, spending $15 million to renovate a historic 1913 stone mansion.

21. $80 MILLION

Glenn Dubin

HIGHBRIDGE CAPITAL MANAGEMENT

Glenn Dubin met partner Henry Swieca four decades ago as a toddler when they shared a peanut-butter-and-banana sandwich in a New York City park. These days they share a fortune, overseeing Highbridge Capital Management, a 12-year-old, $6 billion fund renowned for its stellar risk controls and consistent performance. Since inception the multistrategy offshore fund has posted gains in 127 of 140 months, delivering a more than 16 percent net annual return. In 2003 the fund was up 10.6 percent, net of its 2 percent management fee and 25 percent performance fee, and was profitable in 11 of the 12 months. Highbridge last year expanded its leverage to cash in on the rally in convertibles and benefited from positions in distressed securities and relative-value equities trading.

Dubin, 47, concentrates on strategic planning, client relations and technology and, along with Swieca, runs the overall investment process at the Highbridge Capital Management fund. He graduated in 1978 with a degree in economics from the State University of New York at Stony Brook. He then joined E.F. Hutton & Co. as a stockbroker and in 1984 launched Dubin & Swieca, an asset management and brokerage group, with Swieca, under the Hutton umbrella. In 1987 they started the Fort Tryon Futures Fund, one of the earliest funds of hedge funds, investing in a range of managers, from commodities to securities specialists. The more public of the pair, Dubin helped good friend Paul Tudor Jones II start the Robin Hood Foundation and sits on the board of the Michael J. Fox Foundation for Parkinson's Research.

An accomplished athlete, Dubin captained the football team at SUNY Stony Brook as a running back and outside linebacker. These days the highly competitive fund manager prefers the safer sport of tennis.

21. $80 MILLION

Henry Swieca

HIGHBRIDGE CAPITAL MANAGEMENT

More of a trader and less of an athlete than his Highbridge Capital Management partner and childhood friend, Glenn Dubin, Henry Swieca first made his mark investing in South African gold mine stocks during the inflationary upsurge of the late 1970s while he was working toward a degree in economics and French at the State University of New York at Stony Brook. He traded options as a founding member of the New York Futures Exchange while he earned his MBA in finance at Columbia Business School. At 12-year-old Highbridge -- named for the old, now-disused landmark aqueduct from the pair's childhood neighborhood in upper Manhattan -- Swieca concentrates on supervising risk management, compliance, financing and operations. Together he and Dubin oversee the overall investment process. The pair leave the day-to-day investment decisions to money managers specializing in one of the multistrategy fund's seven core strategies. It's a system that serves them well. In 2003, Highbridge was up 10.6 percent, net of fees.

As of year-end 2003, U.S. convertible arbitrage accounted for 44 percent of Highbridge's assets, European convertible arbitrage for 12 percent and Asian convertible arbitrage for 10 percent. The remaining 34 percent was divvied up among event-driven and relative-value arb, 10 percent; special opportunities, 8 percent; statistical arb, 8 percent; private placements, 4 percent; long-short equity, 2 percent; and European special situations, 2 percent.

Swieca, 47, began his career as a broker with Merrill Lynch & Co. He joined Dillon, Read & Co. as an institutional salesman before reuniting with his old buddy at E.F. Hutton & Co. in 1984. The very private Swieca is a generous backer of civic and religious causes.

23. $75 MILLION

Stephen Feinberg

CERBERUS CAPITAL MANAGEMENT

Stephen Feinberg's New York­based Cerberus Capital Management, named for the three-headed dog that in Greek mythology guards the entrance to Hades, is a cross between a hedge fund and a private equity fund. The five funds that account for most of the firm's $7.5 billion in hedge fund assets frequently invest in the kinds of illiquid securities of distressed and bankrupt companies also found in Feinberg's private equity funds and managed accounts that participate in similar investment programs, which have an additional $4.4 billion in assets. Last year four of his five hedge funds recorded double-digit gains, including his largest -- the $3.4 billion Cerberus International -- which finished up 22.4 percent, net of its 1 percent management fee and 20 percent performance fee. Many of Feinberg's top realized and unrealized gains came from a number of midcap companies that Cerberus has control of or owns outright. He also enjoyed big gains from relatively liquid distressed trades, including conglomerate Tyco International and telecommunications companies Qwest Com- munications and WorldCom. Perhaps his most striking score last year came from his 2002 purchase out of bankruptcy of Anchor Glass Container Corp. After a high-yield offering, Anchor in September 2003 completed an initial public offering of common stock. Cerberus earned back its estimated $100 million to $130 million purchase price and still wound up owning more than 60 percent of the company, worth about $200 million.

Secondary-market equities are not a big part of Feinberg's strategy. Last year Cerberus bought the finance arm of bankrupt Conseco, and it recently teamed up with Oaktree Capital to buy surfacing materials maker Formica Corp., which in June emerged from bankruptcy. Earlier this year Cerberus joined with Georgia-Pacific Corp.'s management to buy that company's building products distribution business for about $780 million. At year-end Feinberg had just $529 million spread over 22 positions, the largest being Allstream, the former AT&T Canada, which was recently bought by Manitoba Telecom Services.

Feinberg, 44, began his career at Drexel Burnham Lambert, where he traded big pools of firm capital, then he managed separate accounts for Gruntal & Co. and a small number of other accounts. A graduate of Princeton University, where he earned a BA in politics and starred on the tennis team, he served as a paratrooper in the Army reserves.

24. $70 MILLION

Jeffrey Gendell

TONTINE ASSOCIATES

Jeffrey Gendell deftly avoided the boom and bust of the technology and Internet bubble of the 1990s, making a splash instead playing the consolidation of the banking and thrift industry -- mostly through investments in very small, capital-flush neighborhood savings and loans, homebuilders and other undervalued stocks. In the process the former general partner at Odyssey Partners quietly amassed $1.5 billion under management. Investors were ecstatic last year: His Tontine Financial Partners rose 79.4 percent, while Tontine Partners, a general value fund, soared by 197 percent, net of his 1 percent management fee and 20 percent performance fee. (Tontine Financial has returned more than 40 percent annually in each of the past four years.) Gendell's largest holdings at year-end were in financial services powerhouses: common stock of Citigroup and common stock and calls of Washington Mutual and J.P. Morgan Chase & Co. He also held a significant stake in oil service holding company depositary receipts, or HOLDRs, which are exchange-traded funds.

The Greenwich, Connecticut­based Gendell is beginning to diversify out of financial companies and into industrial concerns such as U.S. steelmakers, iron-ore companies, lumber suppliers and what he called "the low-end casting and forging" business in a November 2003 interview with Barron's in which he foresaw the greatest boom in the industrialized sector in his 25 years in investing, driven by demand from China, which has greatly driven up shipping rates.

Gendell, 44, who earned a BA in economics from Duke University and an MBA from Wharton School of the University of Pennsylvania, serves on the board of visitors of the Nicholas School of the Environment and Earth Sciences at Duke University, a graduate research and professional school for the interdisciplinary study of the environmental, biological, physical and social sciences.

25. $65 MILLION

Seth Klarman

BAUPOST GROUP

Value sleuth Seth Klarman certainly learned from a pair of masters when he spent one and a half years at Max Heine and Michael Price's New York City­based money management firm, Mutual Shares, between earning a BA in economics at Cornell University (1979) and an MBA from Harvard Business School in 1982. In Cambridge he caught the eye of several wealthy people, who asked him to manage $27 million, allowing him to establish his own firm in 1982. Today the president of Boston-based Baupost Group runs $4.6 billion in nine funds, which are closed to new investors. Last year Klarman racked up a 22.86 percent net composite return, largely riding the huge rally in distressed debt -- the biggest contributor to his return. He also did well with equities of both foreign and U.S.-based companies. At year-end he had just $166 million spread over 19 obscure names in his U.S. stock portfolio. Klarman's biggest positions were in Greensburg, Pennsylvania­based utility Allegheny Energy; Israeli telecommunications equipment maker Radvision; Fairlawn, Ohio­based specialty-chemicals maker Omnova Solutions; and Needham, Massachusetts, software maker Parametric Technology Corp.

Klarman, a strong believer in absolute, not relative, value, frequently joins luminaries like Berkshire Hathaway's Warren Buffett and Gabelli Asset Management's Mario Gabelli on value investing conference panels. In 1991 he explained his theories in Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor (HarperCollins Publishers). Klarman, 47, is board chairman of Facing History and Ourselves, a national teacher-training organization that uses the example of the Holocaust to emphasize the importance of fighting bigotry and anti-Semitism. He is also board chairman of the David Project, an Israel advocacy group, and serves on the board of Beth Israel Deaconess Medical Center in Boston. Klarman owns Klaravich Stables: One of his horses finished seventh in the Kentucky Derby but had to drop out of the Preakness Stakes and the Belmont Stakes because of an injury. The horse's name: Read the Footnotes. Just what his owner recommends.

Where are they now. . . ?

It's not easy to make our list of the highest-earning hedge fund managers. Eleven people from last year's list failed to qualify this year. Four fell off because one or all of their key funds lost money. The rest did fine -- just not well enough to make the $65 million cutoff (2002 earnings are in blue).

STANLEY DRUCKENMILLER

Duquesne Capital Management

($175 million)

His No-Margin Fund was up 4.12 percent, but George Soros' former chief tactician just missed.

DANIEL BENTON

Andor Capital Management

($130 million)

Technology expert Benton was late in shifting from a short-heavy portfolio to long positions; his biggest funds finished down for 2003 by double-digit rates.

GILCHRIST BERG

Water Street Capital

($95 million)

Big losses on his short positions resulted in a 32 percent decline in Polar, his short-only fund.

STEPHEN MANDEL JR.

Lone Pine Capital

($69 million)

The former Tiger cub was up 10.5 percent gross in his largest fund, leaving him short at about $50 million.

JOHN GRIFFIN

Blue Ridge Capital

($57 million)

This former Tiger cub was up about 9 percent net, so he made closer to $45 million.

J. CARLO CANNELL

Cannell Capital

($56 million)

Cannell, who is no longer running the firm's funds, made about $59 million last year.

GEORGE HALL

Clinton Group

($53 million)

First, his mortgage-heavy fund stumbled, then months of regulatory investigations followed. No charges followed, but the damage was done. Investors pulled out huge sums.

MATTHEW TEWKSBURY

Tewksbury Capital Management

($48 million)

Tewksbury made less than $45 million as his fund climbed 10.73 percent.

JOHN HENRY

John W. Henry & Co.

($40 million)

Boston Red Sox owner Henry had a better year off the field: His largest program, the Strategic Allocation Program, rose by 8.4 percent -- not enough to make the minimum.

CLIFFORD ASNESS

AQR Capital Management

($37 million)

His flagship fund was up 8.5 percent, so he made"only" $50 million.

PATRIK BRUMMER

Brummer & Partners

($32 million)

His largest fund -- Zenit -- lost money, while his other large fund -- Nektar -- was up 8.73 percent.