A $100 million here, a $100 million there, and pretty soon you're talking about real compensation. U.K.-based hedge fund manager GLG Partners (NYSE:GLG) announced today that it has hired Goldman Sachs (NYSE:GS) partner Driss Ben-Brahim. In 2006, Ben-Brahim sent the London press into a frenzy when it was reported that he earned a $100 million payday.

With those kinds of numbers being thrown around, leaving Goldman might look like an odd decision, but Ben-Brahim can always point to the man whose shoes he'll be filling. GLG is losing its highest-profile portfolio manager, Greg Coffey, who is walking away from a $250 million stock payday to launch his own fund.

What are the lessons for investors here (beyond the Disneyland economics of hedge funds)?

SWFs are a growing opportunity for hedge funds ...
... and I'm not referring to personal ads here. SWFs, or sovereign wealth funds, are government-controlled investment funds that manage part of a country's wealth. Asian and Middle Eastern SWFs have captured the headlines during the credit crisis by making investments in some of the pillars of the U.S. financial system, including Citigroup (NYSE:C), Merrill Lynch (NYSE:MER), and Morgan Stanley (NYSE:MS).

At GLG, Ben-Brahim will have wide-ranging responsibilities, one of which is the development of specific hedge fund strategies for SWFs. GLG already has its foot in the door; Istithmar PJSC, a Dubai SWF, owns a 3% stake in GLG and is an investor in some of its funds.

According to the International Monetary Fund, sovereign wealth fund assets could grow to $10 trillion by 2012, from $2 trillion-$3 trillion in 2007. Total hedge fund assets were approximately $2.8 trillion at the end of the first quarter.

Is GLG a ‘buy'?
Ben-Brahim's hire is a tremendous coup for GLG, mitigating the effects of Coffey's departure. (Coffey was managing $6.3 billion at the end of April, approximately one-quarter of GLG's assets under management.) Indeed, it's rare for a trader of that stature to join an existing firm instead of going out on his own. GLG co-CEO Emmanuel Roman, a Goldman alum, was instrumental in coaxing Ben-Brahim to join him.

Is GLG really the most attractive stock in the alternative manager sector, over Blackstone (NYSE:BX), Fortress (NYSE:FIG), and Och-Ziff, as Credit Suisse recently wrote? Perhaps on a relative basis, but I'd be very prudent -- GLG's franchise is much less well diversified, and with a market value representing 8.3% of assets under management, it doesn't look wildly cheap. When it comes to investing in this group, make sure you don't buy the hype.

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