China has emerged as having the second highest number of Asia-focused hedge funds in the world, next to the US, according to latest industry data from Hedge Fund Research.

The percentage of Asia-focused hedge funds located in the mainland has increased by 5 per cent from a year ago to 23.6 per cent, with the HFRX China Index gaining 19.82 per cent in the second quarter and 35.9 per cent in the first half of this year. The index is a composite of funds focusing specifically on China investments.

The surge in Asian equity markets during the period has contributed to the strongest performance in nearly 10 years for such funds. The HFRI Emerging Markets: Asia (ex-Japan) Index delivered its strongest numbers since 1999, gaining 18.86 per cent, with total performance-based asset profits reaching $6.8 billion. Overall, assets in Asia-based hedge funds rose by $3.2 billion to $68.2 billion.

"Investors looking to access growth in 2009 and in coming years will be allocating to Asia-focused hedge funds. As the Asian hedge fund industry continues to evolve, the diversity of strategy offerings continues to increase, enhancing the robustness and appeal of the industry for global investors,” said HFR president Kenneth Heinz.

China snatched its current second place rank from the UK.