The rapidly burgeoning hedge fund market is based on the relative volatility of equity and bond markets and has previously invested heavily in the United States.
However, financial markets analysts are urging fund managers to look at other, more volatile markets for higher returns, Reuters reports.
US regulators are introducing new legislation governing hedge funds and most funds must now register with the Securities and Exchange Commission (SEC).
Speaking at a conference on hedge funds in Dubai, Teun Johnston of Credit Agricole Alternative Asset Management said: "In the US the markets are now more efficient, there are lot more funds and I think (it's getting) harder for hedge funds to achieve returns."
Howard Leedham, senior managing director of Argent Financial Group added that US volatility has "disappeared" in recent months, forcing a move east to countries like Japan, where equity markets are rallying.