Figures from International Financial Services (ISFL) showed that London hedge funds now manage 21 per cent of assets under the control of hedge funds - up from just ten per cent in 2002.
During the period covered by the survey ISFL also revealed that hedge funds' assets in London grew to $360 million.
News of London's funds' elevated status comes as the survey also revealed that their New York counterparts have seen their share of the sector dip from 45 per cent in 2002 to 26 per cent in 2006.
According to the compilers of the survey, London owes its growth to a number of factors including "local expertise, the proximity of clients and markets, a strong asset-management industry and a favourable regulatory environment".
Earlier this year a report commissioned by Michael Bloomberg, mayor of New York, called for greater regulatory changes to enable New York to more ably compete with foreign bourses.