The third quarter proved strong for Asian hedge funds, with the HFRX China Index rising 10.5 per cent in the period.

In a report by Hedge Fund Research, the index's year-to-date performance went up to +5.5 per cent, outperforming the benchmark Shanghai Composite by almost 25 per cent. The strong performance was attributed to growing global interest in Asian markets: investments into Asian hedge funds had gone up by almost $4 billion to $78 billion, including more than $300 million in net new investor inflows.

The strong performance of Asian hedge funds comes at a time when investors around the world have begun to rebuild their faith in the sector, after these investment vehicles were pumelled in 2008, making a partial recovery in 2009. More recent data has pointed to a pickup in investor inflows.

"Macro development in Asian financial markets have become catalysts for global markets, including currency, equity, commodity and inflation exposures," Ken Heinz, the president of HFR, said in a statement. "The Asian hedge fund industry has evolved to provide global investors with access to these influential market dynamics."

Over the past year, the number of Asian hedge funds focusing on event driven strategies increased to almost 8 per cent of the industry, over half of which specialise in activist and distressed strategies. New funds continue to locate in China; nearly 25 per cent of all Asian hedge fund firms are now located in China.