Despite another disappointing year for Chinese equities, mainland-focused hedge funds have produced solid gains, outperforming their benchmark equity indexes by a wide margin.
Greater China-focused hedge funds are up 17.8 percent in the year through November, according to data from research firm Eurekahedge, far surpassing the Hang Seng Index and Shanghai Composite. The Hong Kong market is up just 5.4 percent over this period, while the mainland market is down 2.1 percent.
This is in stark contrast with Japanese hedge funds, which have returned 24.1 percent in the year through November - lagging the Nikkei 225's over 50 percent rise. And, European-focused hedge funds which are up just 7.4 percent, trailing Germany's DAX and the U.K.'s FTSE 100, which have risen 23.6 percent and 12.8 percent, respectively.
(Read more: No letup on risk for hedge funds this December)
The majority of Greater China-focused hedge funds run an equity long-short strategy, which has worked well in the current market environment where there is disparity in the performance of sectors, say analysts.
The long-short strategy seeks to profit from stock gains in the long positions and price declines in the short positions.