RPT-UBS sees pick up in Asia hedge fund industry

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* 20 hedge funds set up in Singapore since start of 2009 -UBS

* Investors exiting cash in search for performance

* Industry assets could hit new peak in 18 mths

SINGAPORE, Oct 16 (Reuters) - Asia's hedge fund industry is recovering from record losses last year and there is growing interest from investors keen to invest in the region's hedge funds, Swiss bank UBS AG said on Friday.

There have been 20 relatively large hedge funds set up in Singapore since the start of 2009, and UBS was speaking to 50 different groups of people planning to start their own funds around the region, the bank's head of Asia Pacific prime services, David Gray, told reporters.

"Singapore seems to be attracting a lot of start-ups, especially the bigger ones," he said, adding Singapore had seen a larger number of "solid" setups than rival Asian financial centre Hong Kong.

"You still see people holding significant amounts of cash in their portfolios. This is gradually changing as investors come out of their bunkers and start to look for performance."

Asian hedge funds have gained 21.45 percent in the nine months to September, following negative returns of 20.57 percent last year, Singapore-based fund tracker Eurekahedge estimates.

Gray said the hedge fund industry was recovering from losses and outflows last year and industry assets could hit a new peak within the next 18 months.

"There is a huge amount of funds not deployed yet."

Singapore has attracted asset managers, private banks and hedge funds in recent years with tax incentives and strict secrecy rules.

It is home to 138 hedge fund managers, who manage at least $34.9 billion in assets, the Singapore branch of the Alternative Investment Management Association says.

The city state also provides investors the opportunity to manage part of the more than $300 billion in assets held by its sovereign wealth funds GIC and Temasek. (Reporting by Kevin Lim; Editing by Clarence Fernandez)