In spite of the recent blowups of a number of well-known hedge funds, these investment vehicles will continue to grow and be a popular investment choice this year, according to Deutsche Bank’s alternative investment survey.

“Investors indicated that they are keeping the market and industry events of 2006 in perspective and using risk management as a key factor in selecting hedge fund managers,” said John Dyment, global head of the hedge fund capital group at Deutsche.

Deutsche, which surveyed over 1,000 representatives from almost 700 institutions, found that some strategies will see a large increase in growth of assets, such as merger arbitrage, which is predicted to have a 20% increase in assets based on portfolio rebalancing.

For this year, 18% of investors think the best performing strategy will be long/short equity. Another 13% stated macro strategies, and 12% thought event-driven/relative value strategies would be the top performer.

Investors are not keen on the idea of hedge funds adding private equity components to their traditional hedge fund offerings, and 39% of investors indicated they felt it was a bad idea.

China is going to come into the limelight this year, and Deutsche Bank predicts inflows of more than 38% of current investment levels to these funds. Also, emerging nations in Asia are expected to be the top-performing areas in Asia for the second consecutive year.

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