* Portfolio managers, traders see most gains in pay in 2012
* Hiring environment remains cautious
* Funds wary of aggressive expansion
By Katya Wachtel
NEW YORK, Nov 8 (Reuters) - U.S. hedge fund compensation has risen in 2012 even as the industry has failed to keep pace with a rising stock market, according to data published on Thursday.
Employees in marketing, compliance and senior investment roles at money-making funds have gotten the largest pay raises in 2012, according to the Glocap 2013 Hedge Fund Compensation Report.
The data, compiled by Hedge Fund Research and recruitment company Glocap, said that as industry assets increased and returns climbed this year, so too did the pool of available capital to pay employees and their managers.
Hedge funds on average have improved their performance since last year, when their value declined by about 5 percent. Still, the more than $2 trillion industry has logged a gain of less than 5 percent for the first 10 months of 2012, while the Standard & Poor's 500 stock index has risen more than 14 percent in that time.
Over the past 12 months, 43 percent of all hedge funds have reached levels where they can charge clients performance fees in addition to the less costly management fees, the report said. That has enlarged the pool of incentive fee income available to compensate workers.
Those lucrative fees mean that when a hedge fund has a good year, its top people can earn enormous paychecks. For example, John Paulson of Paulson & Co reportedly earned $5 billion in 2010 as his fund made huge profits from bets on gold. In 2011, Bridgewater Associates' Raymond Dalio earned nearly $4 billion after his fund rose about 20 percent.
Among the main beneficiaries of better performance and asset growth this year, portfolio managers have gotten pay raises of as much 15 percent, the report said.
Those at "mid-performing, mid-sized firms" earned an average $1.3 million in compensation, it said, while top performers at larger firms got more than double that amount.
For some traders, compensation increased by up to 14 percent, while others actually had pay cuts of about 1.5 percent. Senior traders at large firms with mid-range performance earned about $500,000 in total compensation, the report said.
Changes in analysts' pay ranged from increases of 9 percent to declines of 5 percent as "intense competition limited compensation pools at entry and midlevel positions," the report said.
Even as pay has increased for many hedge fund employees this year, "an overall cautious hiring environment has persisted with funds remaining wary of aggressive expansion and rather focusing on selective, essential hiring and very limited speculative and opportunistic expansion," said Glocap Chief Executive Officer Adam Zoia.
Glocap expects that pattern to continue into next year, he said.
Hedge fund professionals in risk management, marketing, legal, accounting and information technology, as well as chief financial and operating officers, received single-digit percentage pay raises over the past year.
Recruiters say the requirements for and expectations of people in these roles have also changed, and their compensation has grown as a result.
"My hedge fund clients want people that understand the strategies, products and life cycle of a trade working in every department or area of their fund," said Jonathan Egan, who manages the Risk and Portfolio Analytics division of recruiting firm JW Michaels & Co.
"So they are hiring traders, portfolio or market risk people, and even quantitative researchers to work in what historically was considered to be 'back office' positions," he said. "To obtain this top talent and keep them happy, they have to pay them accordingly."