Performance goes down, pay goes up. That is the formula in the hedge fund world. And it just keeps going and going and going…

Life is really good for these guys:

Certainly, plenty of hedge fund titans took home billion-dollar paydays last year despite the fact they lagged the big gains in stocks. For example, Steven A. Cohen, who controls $15 billion in assets at SAC Capital Advisors, which has been under intense scrutiny by government investigators, fell just short of the market’s returns for 2012. His take-home pay, however, was about $1.4 billion, earning him the No. 3 spot among the best-paid hedge fund managers.

The Bridgewater Associates founder Ray Dalio, the colorful manager whose “Principles” manifesto discusses the virtues of hyenas’ killing wildebeests, also could not quite beat the market. Yet he ended the year $1.7 billion richer, according to the annual ranking released on Monday by Institutional Investor’s Alpha.

But for several on the richest list, good stock bets meant good paydays.

David Tepper, who oversees $15 billion of assets at Appaloosa Management, turned a modest loss in 2011 into a 30 percent gain after fees last year thanks, in part, to big bets on Citigroup, Apple and US Airways. Gains in those stocks helped Mr. Tepper, who charges his investors a 2 percent management fee and takes 20 to 30 percent of any profits, earn a $2.2 billion payday. That was enough to place him No. 1 in the rankings by Institutional Investor’s Alpha. A spokesman for Mr. Tepper declined to comment.

It’s really astounding.