After suffering the triple whammy of SARS, war and recession last year, asset growth in mutual funds in Asia ex-Japan is returning to its traditional rate of double the rest of the world's average.

Deutsche Asset Management expects substantial growth in the roughly 11,000 funds in Asia (not including China or India) this year. Today assets in Asian funds are only 21% of the world's total, but that will pick up quickly, says Choy Peng-Wah, chief executive at DeAM Asia in Singapore.

Quoting figures from the International Investment Funds Association (IIFA), Choy says assets in Asia's mutual funds rose 9.5% to $1.142 trillion in the first half of 2003 - an unusually low rate, and under the global average rate of 10%. The previous five years saw Asian assets grow 69%, more than double the worldwide average rate. Looking at DeAM's own recent successes in selling mutual funds, as well as good sales at competitors, Choy believes Asian mutual funds are back on track.

A big driver now is not just local investors but hot money from foreign portfolio managers. Choy is concerned that global investors aren't sufficiently cautious when it comes to Asian allocations.

"China-focused funds are attracting a lot of attention and money," he says. "But investors have to be careful. Some so-called China-focused funds do not actually invest in mainland China, where the greatest opportunities and risks are located."

Along with Japan, three Asian markets now rank among the world's top 20 in terms of assets under management for mutual funds. Hong Kong is number 12, with $201 billion; South Korea is 14th with $134 billion and Taiwan is 19th, with $67 billion.

Japan ranks seventh, with $298 billion of assets in funds. The global leader by a country mile is the United States, with $6.8 trillion of assets in funds; the silver medal goes to France with $993 billion and the bronze to Luxembourg, with $913 billion. Australia is fourth with $433 billion, while Italy and the UK round out fifth and sixth place, according to the IIFA.