For Ex-Merrillite Dow Kim, It's $10 Million a Year or Nothing

Last Updated Aug 5, 2008 9:22 PM EDT

Dow Kim, a former honcho at Merrill Lynch, has dropped plans to start a hedge fund, according to a Bloomberg report by Katherine Burton. Why? He couldn't raise the $1 billion he was looking for.

I guess, say, $500 million was not enough, assuming he could get half a loaf.

Let's look at the math.

With $1 billion, Kim's fund, Diamond Lake Investment Group, would earn $20 million a year just on the standard hedge fund fee of two percent on assets. Kim had reportedly hired 30 people based on commitments. If these folks were paid $300,000 on average (remember, some were likely clerical), that's $9 million. Add $2 million for rent, computers and Aeron chairs, and you barely have $9 million left for Kim. If he could only raise $500 million, and he still needed 30 folks to help sort the mail and spread the spreadsheets, though, there's no profit at all -- except of course for the 20 percent of profits these managers typically get on top of their two percent for just for showing up.

Maybe, though, even the $9 million Kim could expect with the full $1 billion wasn't worth his getting out of bed. Various reports say he earned $37 million in his last year as head of trading and investment banking at Merrill, getting out just before Merrill's portfolio tuned into a disaster.

  • Dan Ackman

    Dan Ackman has written widely on business, law, sports and the arts for publications including The Wall Street Journal, The New York Times, The Daily News, Newsday, the New York Post, the American Lawyer, The New York Observer, Inc., Pink Magazine, Forbes, Salon and Slate. He is also a successful civil rights lawyer.