Asian hedge funds failed to deliver on their promise of absolute performance so far this year with only Asian macro funds managing to turn in a positive performance, up more than 6 per cent.

But they have outperformed regional stock markets, with the group down 6.2 per cent for the year to November, according to data from Deutsche Bank, compared with a 17.2 per cent drop in the FTSE Asia Pacific index over the same period.

Event-driven hedge funds, which took advantage of reverse takeovers or the taking private of companies such as Harbin Electric also fared relatively well, losing only 1 per cent.

But prime brokers said that the big funds often did worse than smaller ones. “Many investors confuse flight to size with flight to quality,” says Sam Tabar, head of prime brokerage in Hong Kong for Merrill Lynch. “The big funds are less nimble. You have to be the right size for the opportunity in Asia, which is smaller than in the US.”

The worst record was for China long/short funds which dropped more than 17 per cent in the period, while the MSCI China index was down more than 20 per cent. That disappointing performance partly reflects the fact that it is difficult to short individual shares in China itself while shorting the indices can be perilous.

To get the year right, managers had to have held high cash positions and short very aggressively, especially on the mainland. One popular position which paid off handsomely was to short the Hong Kong listed shares of clothing retailer Esprit, one of the worst performers among listed companies in Hong Kong this year.