The Fifth Annual Alternative Investment Survey found that 18 per cent of investors ranked short/long equity as the top performing investment strategy for 2007, just ahead of macro (13 per cent) and event-drive/relative value strategies (12 per cent).
The highest jump is assets is likely to be seen in funds that invest in China, with inflows of up to 38 per cent of current investment levels and investors are more likely to accept lock-ups of two years or more.
"Despite a series of setbacks and scares in 2006, survey respondents feel the hedge fund industry will continue to grow modestly in 2007," John Dyment, Deutsche Bank's global head of the Hedge Fund Capital Group, commented.
Mr Dyment added that investors are keeping the past year's events in perspective and "using risk management as key factor in selecting hedge fund managers".
More than 1,000 representatives of almost 700 institutions took part in the annual survey, which suggests that emerging Asia will be the best performing region of 2007 for the second consecutive year, with over half of respondents planning to boost exposure in Asia.
Recent figures have indicated that hedge funds witnessed their steepest annual gains in three years last year, providing the $1.3 trillion industry with a major boost.