* Top managers earned $14.4 bln in 2011, AR says
* Bridgewater's Dalio topped list with almost $4 bln
* Icahn, Simons, Griffin, Cohen round out top five
* Last year's top earner, John Paulson, off AR magazine list
By Katya Wachtel
NEW YORK, March 30 (Reuters) - Three prominent hedge fund managers each made more than $2 billion in 2011, a year when most traders failed to earn money for their wealthy customers, according to an annual survey by AR magazine.
Collectively, however, this exclusive group of the 25 richest hedge fund managers took a 35 percent pay cut last year, when hedge funds on average lost 5 percent.
AR's "rich list" of top hedge fund earners showed the group raked in $14.4 billion, down from $22 billion the year before. To see the AR story, click on:
Raymond Dalio clocked in at the top spot, earning nearly $4 billion as his Bridgewater Associates was one of the top-performing funds, with returns of about 20 percent.
Carl Icahn, who runs Icahn Capital, and James Simons, who retired from Renaissance Technologies Corp, also had multibillion-dollar earnings, rounding out the top three.
Noticeably absent from the AR ladder was 2010's top earner, John Paulson, who fell off the list entirely after a miserable year in which one of his biggest portfolios lost more than half its value, and his flagship Advantage Fund lost 36 percent. Paulson reportedly earned $4.9 billion in 2010.
But Paulson was not the only manager who experienced a change in fortune. Volatile markets last year hobbled many of the previous year's top earners. Fifteen managers who were part of the AR rich list in 2010 didn't make the cut in 2011.
Activist investor Icahn earned $2.5 billion during a year that his firm made about 35 percent, and mathematics professor turned hedge fund founder Simons made $2.1 billion. Citadel's Kenneth Griffin and SAC Capital Advisors' Steve Cohen, long-time top earners, rounded out the top five, taking home $700 million and $585 million, respectively.
Dalio, Simons and Cohen cruised into top positions for the second year in a row, though in 2010 each of their paydays was bigger, according to AR's calculations.
Hedge funds managers typically charge investors 2 percent for managing their money, meaning that the industry's largest funds often present their managers with the biggest checks. In good years, managers can also skim off 20 percent or more of the profits from their trades.
New arrivals to the top 25 in 2011 included Dalio's deputies at Bridgewater, Greg Jensen and Robert Prince, the firm's co-chief investment officers.
Chase Coleman, whose top double-digit returns in 2011 made him one of the industry's most sought-after managers, also zoomed into the list's upper echelons to land at spot No. 6.
At 36, Coleman ranks as one of the industry's younger managers but also as one its most successful, after his Tiger Global Management made most of its money last year on the short side, or by betting that certain securities would fall, investors in his fund said.
Industry veteran Paul Singer of Elliott Management Corp also scored a place in the exclusive group as did Baupost Group's Seth Klarman, widely followed in the investment community as a deep-value investor known for the originality of his securities selection.
More than a dozen managers also dropped off the list as tough market conditions took a toll on performance and subsequent paychecks. David Tepper, who had made the list for years, dropped off, as did George Soros, who turned his firm into a so-called family office where he and his staff oversee only the Soros family fortune.
AR has been estimating industry compensation since 2001 and the list is always closely watched, especially now that Wall Street paychecks are being scrutinized extra hard after the 2008 financial crisis.
AR's rankings closely correspond to the Forbes magazine list of 40 highest-earning managers of 2011, though the amount of compensation varies. In that survey the top 40 profit-makers pocketed $13.2 billion.
Dalio topped the chart on that list too. However, Forbes estimated his earnings at about $3 billion, about $1 billion less than AR calculated.
Determining the earnings of top hedge fund managers requires some amount of guesswork, since funds do not publicly disclose compensation. AR bases its estimates on the fees charged by funds and the percentage of capital a manager is believed to have in his fund.
On the Forbes list, Simons was runner-up to Dalio instead of AR's No. 2 placeholder, Icahn, who placed third.