Expert View: The gilded cages of the hedge-fund Vanderbilts

The only serious threats to the super-rich are personal ones

Greenwich, Connecticut - Driving past a church, I notice people flocking to that morning's event: a "patriotic singalong with ice cream". I turn into the village high street, where old-fashioned, pith-helmeted traffic cops stand at every intersection, in lieu of vulgar traffic lights.

No wonder, when we park, my host feels safe enough to leave all the windows open in his brand-new Lexus. After the usual Perrier and salad business lunch we pause at the windows of the latest village shop, Tiffany's. Welcome to Greenwich, Connecticut - hedge fund wonderland.

In the past 20 years, the hedge fund high rollers - with their various complex strategies, their leverage and their short selling of stocks - have become the dominant force in nearly every market. Greenwich is their capital.

It is estimated that over 10 per cent of the global industry is now controlled from this once-sleepy commuter town. New York trains reverse the traditional traffic, with young city slickers who choose to live in Manhattan crowding the outbound trains each morning. Nearly 70 per cent of Greenwich office space is now occupied by hedge fund managers, with rents rising way beyond midtown Manhattan prices.

The fortunes made here are colossal. At the top of the Greenwich tree are the likes of Eddie Lampert (estimated worth $3.5bn, or £1.9bn), Steve Cohen ($2.5bn) and Paul Tudor Jones ($2bn). But below them are hundreds, maybe thousands, earning in excess of $10m a year.

The crucial dynamic in these hyper-inflated incomes is the extraordinary repricing of their services that hedge fund managers have achieved. While traditional fund managers struggle to get their clients to pay more than a small fraction of 1 per cent annual management charge, these wizards charge 2 per cent plus a hefty 20 per cent performance fee. Some charge even more. Mr Tudor Jones reportedly rakes in 4 per cent per annum, and Mr Cohen a 50 per cent performance fee.

The effects of this transfer of wealth are proving dramatic. The disparity of incomes in the US is at its highest since the gilded age between 1900 and 1910. The top 1 per cent now controls nearly 20 per cent of national income. Interestingly, whereas in the 1900s only 20 per cent of this top segment worked, now that figure is over 60 per cent.

A new gilded age? I spent this 4 July in the various palatial Vanderbilt family homes in Newport, Rhode Island. Newport was Greenwich's predecessor 100 years ago, with some 300 mansions at its peak. True, whereas the Vanderbilts spoke French at table and dined in white ties, today's financiers are more often T-shirted geeks who studied physics at college. On the other hand, the building mania that is gripping Greenwich is creating a new Newport. The average price paid for a house in Greenwich last year was $2.5m, but 16 went for over $10m. Many more are built from scratch for even more.

The three wise men of Greenwich make the Vanderbilts seem penny-pinching. Mr Cohen's 14-acre estate is crowned by a house of 32,000sq ft, complete with an ice skating rink and two putting greens. Mr Tudor Jones's domed monster-house has underground parking for 25 cars. Mr Lampert paid nearly $21m for a house seven years ago, then promptly knocked it down to build again.

Remarkably, this vast disparity of wealth created by the hedge fund phenomenon is broadly accepted in America. A Connecticut politician who questioned the low local taxes that have lured so many hedge fund managers from Manhattan to Greenwich in the past five years was shouted down. Public criticism is muted; the only serious threats to the super-rich are personal ones. Anonymity is a Greenwich obsession, and with good reason. Mr Lampert was kidnapped three years ago from the garage below his Greenwich office and held hostage in a cheap motel for two days.

As I drove back into Manhattan, for the first time in my life here, I felt as if I were returning to the real world.

Christopher.walker@tiscali.co.uk