The New York Times states that hedge fund manager James Simons earned $1.7 billion last year. Noted economist Brad DeLong wonders what hedge fund managers are doing to earn their money: "There is some question as to what the hell they are doing that is worth [that kind of money]. The answer is damned mysterious.”
In Mr. Simons's case, if a three-year-old Bloomberg article can be believed, since 1988 his fund earned "almost 35 percent a year after fees". (The Times article states that last year, the fund was up 44% after fees.)
Yes, one would like to know what kind of risks Mr. Simons's fund is taking. Yes, Long Term Capital Management also had a few good years before utterly blowing up.
But 35 percent/year for 15 years or so? I'd take it.
And I wouldn't begrudge Mr. Simons some generous compensation. As one investment advisor put it, "If you pay peanuts, you get monkeys."