In a quest for higher returns, investors are expected to look at hedge fund opportunities overseas in 2007, according to the Deutsche Bank AG 2006 Alternative Investment Survey.

Emerging market funds are the big draws. The report estimates that China could see inflows as high as 39 percent in net new money. Singapore, Hong Kong and Latin America could see inflows of at least 13 percent in 2007, the report estimates.

“There is a desire to diversify away from U.S.-centric managers," said John Dyment, global head of Deutsche Bank’s hedge fund capital group. “The investment dollars will go to places such as China and Latin America.”

The report estimates that hedge funds in both the United States and overseas will grow 10 percent in 2007, taking in $110 billion in net new money.