Asia-based hedge fund managers are able to generate higher returns than those outside the region running similar strategies, according to a new study.

The results come as some of the world’s biggest hedge funds, including Soros Fund Management, seek to open offices in Asia to complement their existing operations in Europe and the US.

“While there are some very good Asian managers based outside the region, generally they’re handicapped in their return potential compared with indigenous managers,” said Peter Douglas, head of GFIA, the Singapore-based consultancy that carried out the research.

The study, which tracked the performance of 668 funds from January 2005 to May 2010, found that Asia-based managers generated better annualised returns, on average, than their non-Asia-based peers.

Local managers had the edge across all five types of investment strategy included in the study: Asian equity, Asian equity excluding Japan, Chinese equity, Japanese equity, and macro/multi-strategy.

GFIA believes that one effect of the local outperformance will be to increase the dominance of the “Hong Kong/Singapore nexus” as the centre of the Asian hedge fund industry at the expense of London and New York.

Soros Fund Management, billionaire investor George Soros’ investment company, is one of several western groups that is opening an office in Hong Kong to take advantage of the region’s growth.

The hedge fund, which has for years invested in Asia from its New York office, may have calculated that a presence on the ground in Hong Kong would give it better access to information and trading opportunities.

Asia-focused hedge funds (excluding Japan) had about $103bn in assets at the end of May, according to the consultancy Eurekahedge. But in spite of Asia’s economic resurgence relative to the US and Europe, Asian hedge funds have been struggling to raise money this year as investors have fled to liquid and transparent investments.

The Asian industry (excluding Japan) has suffered a $1.4bn net outflow of capital since January, according Eurekahedge. By contrast, the $1,000bn North American industry has received $25bn of inflows over the same period.

One reason investors have shunned Asian hedge funds is that they have a reputation for mostly providing market returns, known as beta, rather than uncorrelated skill-based returns, or alpha.

The GFIA study found that for most investment strategies, the outperformance of Asia-based managers came hand in hand with higher volatility. Only Asia-based Japanese managers achieved superior returns and lower volatility than their non-Asia counterparts.