This is according to Peter Douglas, the principal of wealth management and investment advisory firm GFIA Pte.
Speaking at the Bloomberg Alternative Investment Forum in Singapore, Mr Douglas said that 70 per cent of the hedge funds started in the region since 2008 have assets of less than $50 million.
He also revealed that the average size of a hedge fund launched last year stood at $40 million, a figure which is about half the amount of those set up in 2007.
Mr Douglas said this problem could partly be attributed to global hedge fund investors pulling out of Asia following the financial crisis.
"In Asia, the problem is compounded because it's too far away from the big pools of allocators," he stated.
Earlier this year, an article in the Financial Times stated that many banks are looking to expand their operations in Asia.
It said the likes of Bank of America Merrill Lynch, Citigroup and UBS all want to hire more staff in the region.
By Asim Shah