New York (HedgeCo.net) – Emerging Markets hedge funds posted their strongest start to a calendar year since 2006 with the HFRI Emerging Markets Index posting an industry-leading gain of +7.3 percent in 1Q12, according to the latest HFR Emerging Markets Industry Report.

Total capital invested in Emerging Markets hedge funds soared to a record of $127.3 billion (802 billion RMB) to end 1Q12, an increase of nearly $10 billion since year-end 2011, eclipsing the previous AUM record of $123 billion set in 2Q11.

This increase in capital was driven by performance-based gains, as net new capital flows from investors remained muted, with funds experiencing inflows totaling $3.1 billion, while those experiencing outflows totaled $3.4 billion, resulting in a modest net outflow of $365 million in 1Q12. New capital flows were concentrated in Emerging Asia and Russia/Eastern Europe, which received $500 million in net new capital combined.