Hedge funds paid more brokerage commissions in Asia last year as the region's rising stock prices boosted trading, according to a study by Greenwich Associates.

Hedge funds accounted for 22 percent of commissions paid for trading equities in Asia excluding Japan, up from less than 5 percent in 2004, the study found. Total commissions rose to $1.2 billion last year from $766 million in 2004.

Hedge funds are switching attention to Asia, generating more profits for investment banks such as Goldman Sachs Group Inc. and Morgan Stanley as the region's stock markets rally. Hong Kong's benchmark Hang Seng Index surged 39 percent last year, while the Straits Times Index in Singapore jumped 32 percent.

``Hedge funds are staffing up in Asia, and in many cases they are transplanting traders from New York or London to Hong Kong or Singapore,'' Greenwich's Karan Sampson said in the report.

Prime brokerage, which involves processing trades and lending hedge funds money and securities, has become one of the investment banking industry's most profitable businesses.

Morgan Stanley said its revenue from equity sales and trading climbed 32 percent to $6.3 billion in the year ended Nov. 30, fueled by a third year of record results in prime brokerage.

Bear Stearns Cos. generates at least 30 percent of its profit catering to hedge funds, according to estimates by Brad Hintz, an analyst at Sanford C. Bernstein & Co. in New York.

Greenwich questioned 176 portfolio managers and 62 traders in Asia excluding Japan for its study. The investors said they expect Singapore and Hong Kong equities to return 22 percent this year, with China returning 19 percent and India, 18 percent.

Hedge funds, loosely regulated pools of capital that allow managers to partake in gains, account for as much as 30 percent of stock commissions paid in the U.S., according to Greenwich's report in July. The Greenwich, Connecticut-based company provides consulting services to investors and brokers.

At the end of last year, about 782 hedge funds were invested in Asia excluding Japan, managing $101 billion of assets, according to Eurekahedge, a Singapore-based company that tracks the industry.

To contact the reporter on this story: Patricia Cheng in Hong Kong at pcheng9@bloomberg.net

Source : Bloomberg