Deutsche Bank has announced the results of its eighth annual Alternative Investment Survey. Survey respondents represent asset management companies, corporations, family offices, high net worth individuals, foundations, endowments, fund of funds, insurance companies, investment consultants, private banks and private and public pension plans. The bank's hedge fund capital group, within its global prime finance business, conducted the survey during January 2010.

"In 2009, the hedge fund industry experienced its best annual performance in a decade, and investors predict continued strength in 2010," said Barry Bausano, co-head of global prime finance. "Investors predict inflows of US$222 billion this year, which would increase the total amount of hedge fund assets under management to approximately US$1.72 trillion by 2011."

"The hedge fund industry weathered the global financial crisis and matured as a result," said Jonathan Hitchon, co-head of global prime finance. "Risk management remains a top consideration for investors when assessing a hedge fund manager, and investors are increasingly using consultants to perform specialist operational due diligence."

Nearly half the 606 hedge-fund investors who responded to the survey said they planned to add to their asset allocations in Asia excluding Japan this year, according to the survey.

The Deutsche Bank survey also found that investors 'overwhelmingly indicated that they felt the freezing of assets was by far the most damaging action to a fund's reputation'. Eight in ten of the investors who responded said they would not make a new allocation to a fund that had frozen or suspended assets in the past.

Additionally, the survey results suggest that many investors are still sitting on cash that they would rather be investing elsewhere.

Those polled expect that Asia excluding Japan will perform best this year, followed by Latin America, China, and the United States and Canada. They expect Western Europe, Eastern and Central Europe, and Japan to fare the worst.

Over 600 investor entities worldwide, representing over US$1 trillion in hedge fund assets, participated in the industry's largest comprehensive hedge fund investor survey.

Highlights
• 52% of investors predict equity long/short to be one of the best performing strategies for 2010, and 51% believe they will increase their allocations to the strategy;
• Survey participants are looking to reduce their cash levels over the next six months by US$3.09 billion, and 29% have 10% or upwards of cash available to allocate to hedge funds;
• While the hedge fund industry has proven resilient, investors have not forgiven management's behaviour during the crisis: 80% of investors will not make a new allocation to a manager who has frozen or suspended assets in the past;
• There is a continued appetite amongst investors for managed accounts: 14% currently use managed accounts and 26% of investors are likely to in the immediate future;
• Investors remain reluctant to allocate to small start-up funds, with 50% requiring the start-up to have at least AUM US$100 million before investing.