ASIAN warrants have topped the Hong Kong Investment Funds Association performance league for the year to March 31. Despite a sell-off in Asian markets by Hong Kong and international investors in the first quarter, the average sector return for Asia and Pacific warrant funds on the year was 116.54 per cent. On the first quarter, the sector was the worst performer, being down 31.14 per cent. In March it was down 13.25 per cent. Hong Kong funds also have been affected by the first quarter sell-off, as have several other Asia-Pacific funds. Association chairman Richard Haw said: ''The performance of the funds in the first quarter has been affected by the consolidation within the regional stock markets.'' He warned investors not to think short term and concentrate too much on short-term volatility. He said there were several factors behind the change in sentiment following bumper returns last year. ''Profit-taking, US interest rates rises and worries of further increases to cool off inflation and weakness in the bond market all have exerted downward pressure on the regional markets,'' said Mr Haw, who is a director of Schroders Asia in Hong Kong. An association spokesman said: ''In keeping with the top performing sectors table, six out of the top 10 funds were taken up by warrant funds, in particular Asian-related warrants.'' These funds come from Schroders Asia, INVESCO Asia, Sun Hung Kai Fund Management, Jardine Fleming and CEF. In sector performance on the year to the end of March, Thai funds came second, behind Asian warrants, providing 68.88 per cent of return. Malaysian funds were third with 55.77 per cent. Hong Kong equity funds were 11th, with growth of 43.32 per cent. In the first quarter the sector was down 23 per cent, compared with a fall of 24 per cent on the Hang Seng Index. In the first quarter, Japanese funds appeared to produce one of the best returns, at 19 per cent. On the month, Japanese smaller companies and over-the-counter funds did well, with a return of 0.35 per cent. The return was made while all other sectors lost money in the month. Mr Haw said: ''It must be noted that fund investment is ideally a medium to long-term commitment, say over three to five years.'' A buy and hold strategy was what many investors might need to follow. ''Should the markets have strong fundamentals, investors should overlook the short-term volatility and focus on the long-term growth potential,'' said Mr Haw. Warrant funds are extremely volatile and regarded as high risk by the Securities and Futures Commission, along with financial advisers in the territory. Exposure to these funds ought not be more than 10 per cent of an investor's overall portfolio. The Hong Kong Investment Funds Association, formerly known as the Hong Kong Unit Trust Association, has 41 fund management company members with more than 500 funds under management totalling more than US$20 billion.