When people are described as Hedge Fund Managers, what is it exactly that they do? How does being one lead to such huge wealth? A recent New Yorker article about Robert Mercer by Jane Meyer, titled THE RECLUSIVE HEDGE-FUND TYCOON BEHIND THE TRUMP PRESIDENCY, has me wondering. I listen to Economic Update on KPFA, thanks for the great show.
Basically, Hedge Fund managers receive the money of clients to invest it for them. They usually charge a percentage of the sums given them plus a share of whatever gains their investments obtain for such clients. The idea is that such hedge fund managers know markets and have opportunities to invest far more advantageously than the wealthy clients do (as they are usually engaged in other pursuits). Hedge funds have managed to maneuver tax laws that make their incomes subject to lower rates of taxation than other comparable income sources. So when they do well - with other people's money - they rake off huge gains for themselves with relatively little outlay or risk of their own assets.