NEW YORK Five of the $2 trillion hedge fund industry's biggest names each took home more than $1 billion in earnings last year, according to an analysis released by Forbes on Tuesday.
The financial magazine said hedge fund veterans David Tepper, Carl Icahn, James Simons, Steven Cohen and George Soros topped the list of big hedge fund earners in 2012, a year when the average hedge fund rose only 6 percent.
The broader stock market, by comparison, added about 16 percent in gains last year.
The 40 highest-earning hedge fund managers and traders made a combined $16.7 billion in 2012, according to Forbes.
Cohen, the founder of the $15 billion SAC Capital Advisors, once again found himself at the top of charts despite the scrutiny that surrounds his firm in the federal government's insider trading investigation. Earlier this month, outside investors in SAC Capital notified the firm they intend to pull about $1.7 billion from the manager, in part because of the investigation.
Tepper, who runs $15.5 billion Appaloosa Management, was the industry's top rainmaker, according to Forbes calculations, and is the only the manager that pocketed more than $2 billion last year. Tepper earned $2.2 billion in 2012, when his $5.4 billion Palomino Fund rose more than 29 percent.
That portfolio began 2013 on a strong footing, adding 6.42 percent in January, according to recent data from HSBC's Private Bank.
Corporate agitator Carl Icahn came in second place on the Forbes list, with earnings of $1.9 billion for the year.
James Simons, the retired founder of Renaissance Technologies Corp., tied Cohen for third place on the list. Forbes calculated that both men took home $1.3 billion for the year. Simons still has a considerable stake in Renaissance.
Cohen's flagship fund gained 13 percent last year.
George Soros, who oversees $24 billion of money mostly belonging to himself and his family, earned $1.1 billion in 2012, rounding out the top five hedge fund earners for 2012.
Hedge funds managers typically charge investors 2 percent for managing their money, meaning that the biggest paychecks in the industry are often paid to those who run the largest funds. On top of that management fee, managers can also skim off 20 percent or more of the profits from their trades.
Some managers charge even higher fees.
Forbes looked at the returns and the "fee and ownership structure of a wide array of hedge fund firms" to determine who earned what in 2012.
The figures, which are pretax, also took into account the "personal gain or loss of each manager's interest in their funds" and "firm expenses and profit-sharing arrangements," Forbes said in a statement.
The tally excludes "gains or losses stemming from the shares in the hedge fund firms themselves or from investments held outside the investment pools."
Determining the earnings of the nation's top managers requires some amount of guesswork since hedge funds do not typically disclose compensation publicly. AR Magazine also estimates industry compensation in a closely-watched tally to be released later this year.
Rounding out the Forbes top 10 were Kenneth Griffin of Citadel; Raymond Dalio of Bridgewater Associates; David Shaw of D.E. Shaw & Co; Leon Cooperman of Omega Advisors; and Daniel Loeb of Third Point. Dalio, who earned $800 million last year according to Forbes estimates, topped the list of profit-makers in 2011 with earnings of about $3 billion.
To see the full list of top earning managers click here here
(Reporting By Katya Wachtel; edited by Matthew Goldstein)