More than half of the world's leading institutional investors are putting money into start-up hedge funds and ditching their traditional preference for fund managers with long track records, according to a new study by Deutsche Banc Alex Brown.

John Dyment, head of Deutsche Bank's hedge fund consulting arm, said some of the best-performing funds were now closed to new investments. "This has forced investors to consider less-established fund managers," he said.

The findings are likely to add to concerns over what some critics regard as a growing hedge fund "bubble".

Mr Dyment contends that hedge funds are generally safer than other so-called alternative investments, such as private equity. "Many investors thought that private equity and venture capital were not correlated with the equity markets, but they were proved wrong in the past two years," he said. "Hedge fund managers can make money in positive and negative markets."

He also highlighted the fact that total investments in hedge funds were dwarfed by money committed to private equity funds. "It's actually incredible that there is so little investment in hedge funds," he said.

The study shows that investors are unconcerned about the high management fees charged by hedge fund managers. Instead, they consider investment philosophy to be the most important aspect of manager selection, followed by managers' pedigree and investment performance.

The findings are based on a survey of 168 institutional investors in the US, Europe and Asia. More than half of the respondents said they were increasing their exposure to alternative asset classes at the expense of traditional forms of investment. On average, investors are putting $15m (£10m) directly into hedge funds, though higher amounts are being invested via funds of hedge funds.

The study shows that most investors learn about their hedge fund managers through word of mouth, followed by prime brokers.

But hedge funds have yet to become more transparent. According to Mr Dyment, investors were mostly concerned about the leverage of managers, but they also wanted to know more about strategy shifts and risk monitoring.

Three-quarters of respondents said they were reviewing their portfolios either weekly or monthly.

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