Global hedge fund investors allocated $1.4 billion in net new capital to Asian hedge funds in the third three months of 2011, the sixth quarterly inflow in a row, according to the latest edition of the Asian Hedge Fund Industry Report, released today by Chicago-based HFR.

The inflow represents the eighth quarter in the last nine quarters that Asian funds have seen positive flows. However, due to performance-based asset declines, total assets under management in Asian hedge funds declined to $82.6 billion, the first quarterly decline in over a year.

Asian hedge funds posted performance declines for the quarter, though in most cases they still significantly outperformed Asian equity indices, which experienced significant losses and volatility late in the three-month period, HFR said.

The HFRX China Index dropped by 3.4 per cent for the third quarter and fell by 5.4 per cent through the first three quarters of 2011, although these declines were less severe than the drop in the Shanghai Composite Index, down 14.5 per cent for the quarter and nearly 16.0 per cent over the first three quarters of 2011.

Inflows were concentrated in equity hedge strategies and pan-Asian exposure, with these funds experiencing inflows of over $1 billion and nearly $1.6 billion, respectively.

Asian macro funds and funds focusing exclusively on Emerging Asia experienced modest outflows for the quarter. Through the first three quarters of 2011, investors have allocated $7.6 billion in net inflows to Asian hedge funds, which represents approximately 10 per cent of the $70.7 billion in net inflows committed to the global hedge fund industry over this period.