Investors, managers, and companies are gravitating toward Asia from all angles. Benefiting from a growth rate of nine percent in 2007, China is leading the latest Asian economic boom; its tremendous growth, and the expected potential for sustained opportunities, is creating a residual effect that has industry—and savvy emerging managers—looking eastward.

To date, China is the world’s most popular location for foreign industrial investment, attracting nearly $83 billion in 2007. Although China receives much of the foreign investment attention, many foreign investors and corporations with operations on the mainland are reporting increased costs and steady inflation. Chinese wages are rising, worker shortages are emerging, political unrest, and a strengthening currency are leading many to suggest that the nation’s potential for growth could be waning.

For China, however, there are growing opportunities in neighboring nations. Leading manufacturers such as Nissan, Hanesbrands, and Canon are all looking toward Vietnam and Singapore as viable options in a China-plus-one strategy, where Asian opportunities are pursued by looking at China and another stable nation in the region. By investing in neighbor nations such as Vietnam and Singapore, companies and investors are able to mitigate their risks, should China experience disruption and a derailment of its staggering growth.

For emerging managers, the opportunity and youth of Asian economies provides a great chance to produce outstanding results.

“Asia’s core attraction to global asset allocators,” reports Peter Douglas, Principal, GFIA Pte Ltd., “is there are some world class managers who typically still have capacity.”

As for emerging managers, Asia’s opportunities have never been brighter. Lisa Vioni, CEO and Founder of Hedge Connection, says many of her clients are interested in exploring their opportunities in the region, taking advantage of its economic youth.

“Many groups have spoken to us about approaching funds in Asia, and they would look at emerging managers. They believe those funds have a lot of capacity to grow versus hedge funds in the U.S., where it is more difficult for an emerging manager to raise money,” says Vioni.

The Asian hedge fund market is poised for substantial growth, as the number of funds throughout the region hovers at 1200, up from 400 only three years prior. The surge of available funds demonstrates the potential in regional economies for emerging managers and hedge fund operations.

“There is still a predominance of equity long-short managers, and the majority of those are still broadly Jones-model managers who may do best in sideways or rising markets. But within the catch-all category of equity long-short, there are single-country, sector-specific, model-driven, trading, and other niche strategies,” says Douglas.

Frank Brochin, a General Partner with the New York-based StoneWater Capital LLC, looks at Asia’s potential for growth through the context of rising middle classes, infrastructure demands, and the gains made by companies producing domestic products. These factors, Brochin says, are the true indicators of Asian growth—and provide would-be investors with the best opportunities in the region.

“If you look at China alone,” says Brochin, “you have 25 percent of the population moving out from the countryside into the cities. With that urbanization, you have an enormous amount of infrastructure investments being made by China.”

Aside from the forecasted $725 billion in expected infrastructure spending, the growing Chinese middle class creates an increased demand for consumer goods. Brochin sees this demand as another valuable investment opportunity for foreigners looking to explore the region. Not only is the sector booming, but it also provides some security against inflation risks.

“As these people move into cities, they become richer. As they become richer, you have a growing middle class. This is not only happening in China, but is happening throughout Asia as well. Domestic consumption companies protect you against inflation—they raise their revenue as costs increase. Domestic consumption companies, by definition, will have the ability to increase prices as they go. They are better protected from inflation than other companies that lack this pricing flexibility.”

Aside from the investment opportunities in hedge funds, the region has a robust ETF and mutual fund market. These investments feed off the growing Asian economies, often providing another lucrative opportunity.

“Many people looking to invest in Asia today do so through large mutual funds and ETFs managed from the US. The potential problem is that these funds target large companies, which have become large due to their exports to the West. They do not focus on domestic consumption in Asia,” says Brochin.

Asia’s opportunities for emerging managers do not come devoid of setbacks: many U.S.-based funds experience cultural, linguistic, and legal barriers that require sophistication and regional expertise. With the right people based in the West, coupled with the most insightful experts available in the East, managers can make the most of the market’s potential.

Brochin says, “When it comes to the domestic consumption sector, you need to look for local managers. People on the ground in Asia that are able to identify under-researched small- to mid-cap companies focusing on those sectors will be very helpful.”

“It’s very difficult for people in New York, Boston, San Francisco, and even London or Paris to find ways to access this sector of the market. Having some people there who help you find local funds and fund managers is a great way to do it.”

Vioni’s clients express similar sentiments: as many Western investors and managers look to explore Asia, they are advised to befriend—or become—a local in their area of interest.

“I think it is difficult for hedge funds not located in Asia to get started because its so far away and the culture is so different within each society. Before you begin, you have to ask what their laws, customs, and reporting regulations are. Many funds find that, in order to invest in Asia effectively, they need manpower on the ground,” she says.