Japanese hedge funds were the best performers globally in 2013 with an average gain of 25.7%, although they saw net outflows of $300 million during the year, according to Eurekahedge.
While Japanese managers were able to generate gains from a booming stock market, they were on average below the Nikkei 225's gain of 57%, which was the best-performing broad market last year.
However, there have been outperformers such as Tokyo-based Symphony Financial Partners' SFP Value Realization Master Fund, which was reportedly up about 70% for the year.
Greater China managers also fared well in 2013, gaining 19.3%, which is particularly notable when measured in outperformance relative to their benchmark indices.
Mainland stock exchanges among the worst performers globally, with the Shanghai Composite Index down -6.75%. Hong Kong's Hang Seng Index was slightly better, finishing 2013 up 2.9%.
China-focused managers and their prime brokers have expressed hopes to AsianInvestor that two consecutive years of outperformance - having gained 12% in 2012 - will help draw more investors, particular family offices and institutions from the West.
US hedge fund managers navigated a domestic bull market in 2013 to generate an average gain of about 10%. They were in a similar position to their Japanese peers, having turned in a double-digit average return, but falling below the benchmark, with the S&P 500 up 29.1% in 2013.
Outperforming US funds include some of the industry's largest managers, with the flagship fund of Appaloosa Management reportedly gaining 42% to year-end December, while Paulson & Co's Paulson Recovery Fund was up 55% to end-November. Both firms each manage about $20 billion.
North American hedge funds raised the most capital last year, taking in $73.6 billion of net asset inflows, followed by those in Europe ($62.4 billion) and Asia ex-Japan ($11 billion), according to data provider Eurekahedge.
It continues on a trend of North American institutions - which are the biggest investors to the hedge fund asset class globally - preferring to invest in their home markets, particularly during bull market years for the S&P 500.
A poll of US institutional investors by Preqin last year showed that Och-Ziff, Bridgewater Associates and Davidson Kempner are the fund managers most commonly invested in by US investors, with UK-based Brevan Howard the only non-US-based firm to rank among the top 10 most-favoured groups.
Globally, the hedge fund industry took in $146 billion of new inflows, according to Eurekahedge, which compares to the $109.6 billion of net asset flows in the previous three years combined. The sector is estimated to have a total AUM of $2 trillion globally, with about three-quarters of the capital managed by US-based hedge funds.