The 10 most profitable hedge funds -- that is, the 10 that brought in the most fees -- had relatively lackluster performance last year, according to data compiled by Bloomberg Markets magazine.

In fact, only one fund had a performance ranking that almost matched its profitablity ranking: Ray Dalio's Pure Alpha II for Bridgewater Associates, which was first in profitability and third in performance. The next best performance for a top 10 profitable fund was also by Dalio, this time working with Robert Prince: Pure Alpha 12% was third in profits and 13th in performance.

Three funds showed particularly poor correlation between fees and performance.

OZ Master, by Daniel Och for Och-Ziff Management, ranked sixth in profits, and Elliott International, by Paul Singer for Elliott Management, ranked seventh, but they tied for 99th in performance: a 6.7% return. According to Bloomberg Markets, the S&P 500 index gained 6% over the same span. Not much value added there for those fees.

Salesmanship Beats Trading Prowess

Indeed, these two hedge funds' profitability seems wholly due to their size: With approximately $17 billion and $19 billion under management respectively, both were larger than all the other 100-biggest funds except the much better performing Pure Alpha II, which has $34 billion in assets. (As Bloomberg Markets explains, a 5% return on $10 billion generates more fees than a 50% return on $100 million.) As a result, salesmanship in drawing money in seems to be more important than trading prowess in making the money grow.

The third fund that can't justify its profitability is SAC Capital Management, which earned a stratospheric $1.1 billion in fees to rank No. 2 in profitability, more than double No. 3 in profits Pure Alpha 12%'s $429 million. And yet SAC Capital Management ranked 53rd in performance with an 11% return, below the top 100 largest hedge fund average of 13.9% and half that of Pure Alpha 12%'s 22%. The only fund to earn more in fees was Pure Alpha II, coming in at a chart-topping $2.25 billion. But then again it did return 38% to its investors, nearly triple the average.

Only four of the 10 most profitable funds had above-average returns: The two Bridgewater Associates Pure Alpha funds, and Cerberus Institutional Partners Series IV by Stephen Feinberg for Cerberus Capital Management (20% return, fifth in profits) and Thoroughbred by David Tepper for Appaloosa Management (19.6% return, 19th in profits.)

Since the fees of the profitable hedge funds seem generally so out of whack with their performance, and the performance of the funds overall wasn't stellar, the half of households with a net worth of $25 million or more that have invested in hedge funds should reconsider their choice.

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