Alpha Magazine says that hedge fund managers have to shake their heads in wonderment at the extraordinary continued success of Renaissance Technologies Corp. founder James Simons. Last year his $6 billion Medallion fund posted a 44 percent return after fees, easily exceeding its roughly 36 percent average annualized net return since he launched the quant-based fund in 1988. What makes his performance all the more impressive is that the 69-year-old Simons, who has a Ph.D. in mathematics from the University of California, Berkeley, and once worked as a code breaker for the U.S. Department of Defense, charges a hefty 5 percent management fee and 44 percent performance fee. (The gross return was an astonishing 79 percent.) With $1.7 billion in estimated earnings, Simons tops the list of the best-paid managers for the second straight year.

Alpha Magazine which focuses on the hedge fund industry, says in its April 2007 issue that were Andrew Carnegie, John D. Rockefeller and Cornelius Vanderbilt starting out today -- or Michael Dell and Bill Gates -- chances are these legendary empire builders might be running their own hedge funds, the best bet for making the biggest bucks the fastest in the post-industrial world.

The April issue of Alpha, features the annual rankings of the top earning hedge fund managers. In 2006, three hedge fund titans each took home well in excess of $1 billion in what proved to be by far the most lucrative year in the six that Alpha has ranked the highest-earning managers. In total, the top 25 earners raked in more than $14 billion, equivalent to the GDP of Jordan or Uruguay. Their average take was a staggering $570 million, compared with $362 million in 2005 and $251 million the year before that. Just to qualify for our list, a manager needed to have earned at least $240 million -- nearly double the $130 million cutoff of a year ago and more than all but four managers made when we ran our first list in 2002.

Hedge funds charge too much in fees for performance that frequently mimics major stock indexes, Russell Read, chief investment officer of the $225 billion California Public Employees Retirement System, told Bloomberg News last February.

Hedge funds typically charge a management fee of 2 percent and keep 20 percent of any investment gains. That's unjustified when managers just track market indexes, Read said. The average hedge fund rose 13 percent in 2006, lagging behind the 13.6 percent increase of the Standard & Poor's 500 Index, data compiled by Chicago-based Hedge Fund Research Inc.

In 2006 top hedge fund managers took advantage of the strength of the global equity markets, many of which had their best returns since 2003. "If performance is strong, the managers make a lot of money, and we make a lot of money," says Joncarlo Mark, senior portfolio manager for the alternative-investment management program at the California Public Employees' Retirement System, which has invested about $4 billion in hedge fund strategies.

No managers made more money than the triumvirate of James Simons of Renaissance Technologies Corp., Citadel Investment Group's Kenneth Griffin and Edward Lampert of ESL Investments. Between them they earned an estimated $4.4 billion -- more than all the 25 top-paid managers combined made in each of the first two years of the ranking. Alpha uses two components to arrive at hedge fund managers' earnings: the gains on their own capital in their funds and their share of their firm's management and performance fees. Simons, Griffin and Lampert each have well over $1 billion of their own capital invested in their own funds.

Alpha says that like Carnegie, Rockefeller and Vanderbilt before them, the band of billion-dollar earners couldn't be any more different from one another. Math whiz Simons, who made $1.7 billion to repeat as No. 1, has assembled an army of rocket scientists to build complex computer models that rapidly trade markets around the world, hoping to exploit tiny price changes. Griffin, No. 2 with $1.4 billion in earnings, has built a huge firm by hedge fund standards -- Citadel has more than 1,000 employees -- expanding into ancillary businesses like hedge fund administration and market making. Lampert, who made $1.3 billion in 2006 to finish at No. 3, has stashed the bulk of his assets in a single company -- retailer Sears Holdings Corp., of which he is chairman.

The magazine says that hedge fund tycoons wield enormous power that goes well beyond the business world. Griffin and Steven Cohen, the founder of SAC Capital Advisors (and No. 5 on the list, with $900 million in earnings), are major forces in the art market, regularly ranked among the world's ten biggest collectors, according to ARTnews magazine.

Hedge fund managers are also active in politics. Avenue's Lasry is a major supporter of New York Senator Hillary Clinton's presidential bid, and George Soros (No. 4, with $950 million in earnings) is well known for having tried to prevent President George W. Bush's 2004 reelection.