Best hedge fund bet of 2014 is ... India?

Narendra Modi, prime minister of India.
Prakash Mathema | AFP | Getty Images

Hedge fund managers who focus on emerging markets have produced returns that are, well, all over the map.

A host of positive and negative shocks — bold new leaders, potential wars, drops in currencies and commodity prices have led to huge disparities in investment returns.

India-focused hedge funds, for example, are up an average of 41.9 percent net of fees in 2014 through October, according to industry data tracker HFR. Thanks to optimism about economic reform and growth under new Prime Minister Narendra Modi, the South Asian giant is by far the best performing hedge fund strategy in the world this year.

Hedge funds invested in Russia, on the other hand, have lost an average of 12 percent net of fees, per HFR, perhaps unsurprising given the conflict in Ukraine, a record low for the rouble and falling oil prices. Latin America-focused funds are also down 3.5 percent on average, also hit by declining currencies, such as the Brazilian real versus the mighty U.S. dollar.

"Buying or avoiding all emerging markets as a group doesn't work anymore," said Marko Dimitrijević, founder of emerging markets-focused hedge fund firm Everest Capital. "Selectivity is the key."