Buy-side market participants expect capital flows around the world to focus on equities and hedge funds, particularly when it comes to accessing the Asia growth story.

AsianInvestor and law firm Clifford Chance recently surveyed investors, distributors, fund-management executives and service providers. This is a follow-up to a similar poll conducted a year ago, and the results show a big swing in expectations.

For example, we asked: "Where do you expect to see the largest allocation of capital by institutional investors to Asia over the next 12 months?"

Respondents were allowed to select up to three types of instruments, and 64% included equities in their answer. This is well up from spring 2009, when only 47% said investors would seek Asia exposure via equities. A year ago, the preferred vehicles included bonds and distressed/opportunity funds.

In percentage terms, the biggest change was with regard to hedge funds. In 2009, only 16% of respondents thought these would receive inflows, but now that figure has doubled to 33%.

"The negative feeling towards hedge funds is over," says Matthias Feldmann, a partner in Clifford Chance's funds practice in Hong Kong.

James Walker, another partner at the firm, says this shows the Asian hedge-fund industry has matured. "It shows a coming of age," he says. "We see this in our own business flows, particularly with regard to China. Most of the spin-offs we've worked on for Asia hedge funds are now focused on attracting institutional investors."

In contrast, the survey suggests there are low expectations for managed accounts, which last year were being hailed as the holy grail. Walker attributes last year's preference for managed accounts as a reaction to the Bernie Madoff scandal. "But now people have seen how hard these are to implement," he says. "We see more staying power in Ucits III funds."

Distressed and infrastructure funds seem to be running out of support, which is no surprise, given the string of losses being reported by big private-equity managers. "Financing in Asia has held up well, so distressed plays have been less visible and slower to play out," says Feldmann.

Money-market funds are also out of favour, again confirming that investor flows to Asia are heading to equities and hedge funds, as well as to bonds, exchange-traded funds and private equity.

The full results of the survey appear in the May edition of AsianInvestor magazine.