For the eight months to August this year, funds of hedge funds in Asia were down on average 0.44%, according to data from Eurekahedge. That compares to a flat zero return from the Asian hedge fund index.

According to Eurekahedge statistics, the following are the top non-Japan Asia fund-of-hedge-fund performers for 2010 so far:

YTD Returns (Sep 2010)*

Finles Lotus Fonds

10.66

Permal Asian Holdings N.V - Class A

4.26

Asian Capital Holdings Fund

3.21

La Fayette Asia Fund Ltd - USD

2.23

Persistent Edge Asia Partners Master LP

1.97

Persistent Edge China Partners Master LP

1.45

Vision Asia Maximus Fund - Class A

1.35

Permal Japan Holdings N.V - Class A

1.24

J.H. Whitney Pan Asia Fund LLC

0.91

BT Total Return Fund

0.27

Eurekahedge Asia Pacific Fund of Funds Index

-0.17

In our piece published on October 14, AsianInvestor expressed uncertainty about Finles Lotus Fonds. Since then both Eurekahedge and Finles have been in touch with us to assure us that they belong in this category.

But Brenda Tse, managing director of Permal in Hong Kong, warns about becoming overexcited by these results as it is very difficult to make any meaningful comparisons between individual funds of funds or fund-of-fund indices, and says that trying to compare a China fund to a Japan fund of funds is of moot value.

Whereas the Permal Japan fund mentioned in Eurekahedge’s list is in the bronze medal slot, Permal thinks it has other funds of funds which did well in 2010, even though they may not have had the same performance.

She also points out that an eight-month performance isn’t really much of a gauge. However, AsianInvestor still digs comparisons, performance tables and fostering award-driven competitiveness.

Enter Peter Douglas of GFIA. After the 2008 risk exodus, he perceives that many funds of funds are overweight lower-return managers, and that the larger names will underperform.

“Markets are qualitatively different at the moment, as the world digests a number of confusing and new-to-this-generation phenomena,” he says. “Many experienced managers are finding they're being tripped up regularly, and the few that are making money are often the newbies without 20 years' ingrained experience of how markets 'should' be.

"The funds of funds generally are stocked with the well-known names, and take time to add in new names, hence are probably overweight the experienced, currently underperforming, managers. Many funds of funds are still nervous of their business model, hence running more cash and [more] underinvested than usual.”

If any fund-of-hedge-fund managers disagree with him, then don’t just sit there and fume, write in and reveal why. The November 2010 edition of AsianInvestor magazine will ruminate about how fund-of-hedge-fund managers can create alpha at fund level.