LONDON, March 7 (Reuters) - Hedge funds which bet on rising and falling shares have jumped to the top of investors' buy lists, a survey by Credit Suisse showed on Thursday, as a rebound in stocks encourages a return to a sector many had been avoiding.
So-called long-short equity hedge funds have historically been among the biggest and best-known in the industry.
But years of underperformance - including against their low-fee long-only rivals - had left investors disillusioned and many shifted their money into funds that play fixed-income assets, deemed better at managing macroeconomic risks.
According to the survey, for which Credit Suisse quizzed close to 550 institutional investors representing $1.03 trillion of hedge fund assets - almost half the industry - long-short equity funds have become the most sought-after investments for 2013.
Last year more than a quarter of investors indicated to the Swiss bank they planned to cut their exposure to equity funds, more than any other sector. Emerging markets equity funds are now the second-most popular, Credit Suisse said.
In this year's survey, respondents also predicted total hedge fund assets would hit a record high of $2.42 trillion at the end of 2013, driven by positive performance and net new money.
Investors indicated a preference for mid-sized managers running between $500 million and $2 billion, and expect the average fund to return 6.9 percent, up from 5.4 percent in 2012.
So far this year the average manager is up 2.5 percent, according to Hedge Fund Research. Equity funds have fared slightly better, up 3.3 percent, but this still lags the 6.2 percent gain in the MSCI World Index.