Salary
Average Salary: $312,330
Expected Lifetime Earnings: $13,039,000
Ridici-dollars. This is the reason someone becomes a hedge fund manager. You may not be particularly money-hungry at this point in your young life, but once you've bought your sixth car, fourth home, and third professional sports team, you'll understand the appeal.
A venture or hedge fund will typically charge two percent management fee and up to thirty percent of the profits (for most hedge funds, it's twenty percent of profits), often depending on performance quality and a minimum Return On Investment (ROI) ratio.
Quick math: There are four General Partners in the venture capital partnership that funded The Sauce Company. That fund, PurpleKey, raised $300 million from various investors, with which they funded a lot of companies not dissimilar to The Sauce Company. Despite their being savvy investors and conducting massive amounts of due diligence, there's still a very high failure rate for these investments; you kiss a lot of frogs in the hope that you might get one prince.
It's really sad that our world leaders don't wear tights anymore.
After seven years of hard toil, they had a bunch of bankrupt clunkers but also some home runs. Six of their investments resulted in the Holy Grail—an IPO—and they distributed a total of $1 billion to their Limited Partners. The "Carry" is the difference between the distribution and the original investment, or $700 million.
But wait. Are we to assume that PurpleKey worked seven years for free? Not even close. During that time, they charged two percent fees on the entire $300 million—or $6 million a year times seven years, or $42 million. (We're oversimplifying here for our fine illustrative porpoises.) Fees are subtracted from Carry. So the fund shows a profit of $1 billion minus $300 million minus $42 million, for an overall profit of $658 million.
The ROI is $658,000,000/$300,000,000≈2.17. (Not annualized, obviously). We'll assume that the ROI magic number was two, so they hit the ROI minimums for the investors. Result: The General Partners of the firm keep thirty percent of the $658 million and split $197.4 million four ways, or a tad under $50 million per partner. Not a bad gig if you can get it.