Hedge fund assets may top the previous $2 trillion high by the end of next year as double-digit average returns lure investors, said Barry Bausano, Deutsche Bank AG's global co-head of prime finance.

Hedge fund assets parked with Deutsche Bank have risen recently and global investors plan to allocate new capital next year, Bausano said. His division provides services and products to the hedge fund industry ranging from securities lending to financing and derivatives.

"We fully expect to see material inflows into 2010 and beyond," he said. "The expected growth is reflective of continuing institutional demand for increased risk-adjusted returns in the face of low bond yields and disappointing passive equity performance."

Global hedge funds have rebounded faster than projections by investors in a Deutsche Bank survey in February, even as regulators study ways to increase scrutiny of the industry and managers including Raj Rajaratnam of Galleon Group face insider trading charges. Hedge fund assets recovered to $1.53 trillion by September, from this year's trough of $1.33 trillion in March, according to data from Hedge Fund Research Inc. of Chicago.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.