Despite producing an average return of 3.3 percent last year, the hedge fund industry is on track to surpass $3 trillion in assets this year, according to a new survey by Deutsche Bank.
"We have seen a doubling in assets under management since 2008," said Barry Bausano, president of Deutsche Bank Securities and co-head of global prime finance for Deutsche Bank.
"That's despite what's been pretty pedestrian performance."
The Alternative Investment Survey, set for release Tuesday and previewed by Bausano on CNBC's "Power Lunch," found that expectations for returns are much lower for 2015.
"That is healthy," he said.
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This year, only 14 percent of respondents are expecting to get in excess of a 10 percent return, compared with 37 percent last year.
The average return expectation this year is 8.1 percent, compared with 9.2 percent in 2014. Last year, the survey's respondents got a 5.6 percent return compared with the industry's 3.3 return.
"Not only is strategy selection very important but increasingly manager selection has driven returns," Bausano said. "The top 5 percent of managers last year averaged a 22 percent return."
Investors are also increasingly attracted to quantitative strategies this year, he said, with commodity trading advisors (CTAs) receiving the greatest interest.
"The ones that have attracted a lot have been the trend following managers," Bausano said. "CTA managers were able to capture trends that might have been counterintuitive."
As for where investors are expecting the best performance in 2015, the United States and Canada top the list, followed by Western Europe, Japan, China and India.
—CNBC's Kerima Greene contributed to this report.