Net Net: Promoting innovation and managing change
Net Net: Promoting innovation and managing change

Hedge fund investors: We're happy, really!

Hedge fund growth

Beating up on hedge fund managers is in vogue.

Critics are quick to point out when funds under-perform simple index funds, a relatively common occurrence. Or they gripe about the high fees and lack of transparency among other annoyances.

But the big hedge investors—mostly pensions, endowments and foundations—are sending a different message with their dollars. A large survey of hedge fund investors released Tuesday by Deutsche Bank shows that the funds are sucking in record assets while pleasing their clients.

"Hedge funds continue to establish their growing position within the broader asset management industry, alongside some of the more mainstream asset managers," Barry Bausano, co-head of global prime finance at Deutsche Bank, said of the bank's 2014 Alternative Investment Survey.

Bausano said the industry is predicted to reach a record $3 trillion in assets by the end of 2014, mostly from institutional investors. Hedge funds managed an estimated $2.6 trillion as of Dec. 31, 2013.

2014 hedge fund report card

(Read more: Europe and Japan in vogue for hedge funds)

That growth is spurred by the satisfaction of investors. The vast majority—80 percent—of respondents to the survey felt that hedge funds performed "as expected or better" in 2013.

The HedgeFund Intelligence Global Composite Index, which tracks thousands of funds across strategies, rose 9.21 percent net of fees in 2013. By comparison, the Index gained 29 percent on the year and the fell 4.83 percent.

Hedge fund clients continue to look for less volatile—"risk adjusted" is the industry jargon—returns this year. Near two-thirds of all respondents (63 percent) and nearly all institutional investors (79 percent) are targeting returns of less than 10 percent for their hedge fund portfolios for the year, according to Deutsche Bank.

(Read more: Stocks weren't the best hedge fund strategy in 2013)

"With the majority of investors happy with hedge fund performance, we expect institutional investors to further strengthen their commitment," Anita Nemes, global head of the hedge fund capital group at Deutsche Bank, said.

(Read more: Europe and Japan in vogue for hedge funds)

Those expected returns come with fresh cash: 51 percent of the 400 investors surveyed planned to increased their allocation to hedge funds. The group of respondents already has $1.8 trillion in the industry.

The most sought-after strategies this year are equity long-short and event driven, two top-performing strategies in 2013.

(Read more: The results are in, and the top hedge fund is...)

—By CNBC's Lawrence Delevingne. Follow him on Twitter @ldelevingne.