Fund manager City Financial said today it has launched an Asian fund of hedge funds in a move designed to tap into the rapid development of the hedge fund industry in the region.

The City Financial Asian Absolute Growth Fund, a fund of hedge funds primarily targeting institutional investors, is aimed at capitalising "on the strong maturation of the Asian hedge fund markets", the company said.

This year has seen hedge fund firms including Fortress Investment and Soros Fund Management line up launches in Singapore and Hong Kong as regulators in developed markets step up their supervision of hedge funds.

The launch also comes at a time when institutions are continuing their search for greater diversification by region and asset class.

"Not long ago the Asian hedge fund market was considered 'the wild east,' but this is simply no longer the case," said Andrew Williams, chief executive of City Financial.

Management of the funds is outsourced to Clontarf Capital.

Bank of America Merrill Lynch has estimated that Asia will capture as much as 20 percent of the total global inflows into hedge funds in 2010 with investors drawn to the region's stellar performance last year.

The fund will charge a performance fee of 10 percent of gains, with smaller investors liable straight away and larger investors paying out only on returns of above 10 percent. Smaller clients pay a 1.25 percent fee on the assets invested; larger clients will pay 0.8 percent.

The fund aims to deliver 15 percent returns a year.

The portfolio includes 10 high-conviction funds with exposure to growth in China, India and other Asian markets and is managed by former Goldman Sachs banker Aoifinn Devitt, founder of Clontarf.

"Institutions have for years been investing in the Asian region but most still limit their exposure to long-only holdings," said Devitt.