With geopolitical tensions and other risks turning many US investors away from China, investment funds based in the world's second-largest economy, including hedge funds, are seeking new capital sources in the Middle East and other markets, according to a report by Reuters.

The report cites seven China equity funds, including hedge funds and mutual funds, running more than $500bn in combined assets, as having confirmed that they visited the Middle East this year to raise money, three of them for the first time.

And according to Reuters, lower valuations and the effects of government stimulus to support economic recovery, mean that Middle East investors are also keen to allocate more resources to China.

The pivot by China-based funds from US to Middle East investors could also prompt a switch in Asia's hedge fund ecosystem, with Chineses funds accounting for more than half of the market. Should Middle East fundraising initiatives flourish, brokers and ancillary firms could switch their focus to the region.