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(Refiles to clarify in first paragraph that the strategies outlined are favoured, and that 2010 will be more testing.)
* Countries set to exit downturn at different speeds
* Big asset price rises of 2009 not expected
* Opportunities to differentiate between economies, stocks
* Investors shuffle winning credit bets of 2009
By Laurence Fletcher and Svea Herbst
LONDON/BOSTON, Dec 23 (Reuters) - Hedge funds making big bets on currencies, commodities and equities are favoured by fund selectors in what is likely to be a more testing 2010 after a bumper year for hedge fund returns.
While 2009's best trade has been to buy riskier assets rebounding from last year's depressed prices, funds of funds think 2010 will not see such large price rises and will instead belong to managers with the skill to differentiate between economic and corporate scenarios.
"It's a good environment for stockpickers," said AXA Investment Managers' Chris Manser, who runs $6 billion in fund of hedge fund assets. "(And) conditions are good and the imbalances are still very significant (for global macro)."
Many fund managers think countries will emerge from the global downturn at different speeds -- Britain for instance was still in recession in the third quarter while some trading partners had begun growing in the second quarter -- meaning loose monetary policies may be tightened at different times.
Managers believe this presents a perfect opportunity for global macro funds, which bet on currencies, interest rates, commodities and stocks and which were made famous by firms like billionaire George Soros's Soros Fund Management.
In the 11 months to November this strategy is up 22.34 percent, according to industry consultants Hennessee Group.
"Our favourite strategy is global macro," said Omar Kodmani, senior executive officer at Permal Investment Management Services.
"Global rebalancing is an ideal theme for macro managers... Different countries will come out of the downturn at different speeds and there will be opportunities to play the differences."
Some global macro firms have been so swamped with new cash in anticipation of these returns that they have chosen to turn potential investors away.
Paul Tudor Jones' Tudor Investment Corp told clients at the end of the third quarter that his flagship BVI Global Fund had reached its ideal capacity. Woodbine Capital, a new firm that spun out of Soros early this year, began turning investors away after assets grew to $2.5 billion.
During the first 11 months of the year, funds specializing in fixed income-convertible arbitrage strategies gained 55.46 percent, according to Hedge Fund Research, far more than the average hedge fund's 19 percent return and helped by a huge rebound in convertible bond prices.
Funds specializing in fixed income asset-backed securities gained 21.62 percent, meanwhile.
However, among large investors and industry consultants the sense is that savvy investors are now backing out of their bets on credit that earned them so much money this year.
"I get the sense that investors are moving from one manager to another," said Thomas Lynch, managing director at Cliffwater LLC, a consulting firm which advises pension funds.
Many funds of hedge funds believe an environment in 2010 widely tipped to be characterised by lower than average growth and difficulty in accessing credit will sift the strong companies from the weak. "In equity and credit, I think we'll see much more discrimination and a lot of non-directional opportunities -- who gets financing and who does not," said AXA's Manser.
While managers think 50 percent rallies, as seen this year, are less likely in 2010, pairs trades -- where a manager buys a stock in one sector and shorts one in the same sector, thus eliminating overall market and sector moves -- could profit.
"Long-short equity we rate favourably. It does well when equity markets are more fundamentally driven," said Permal's Kodmani.
"In 2010 stronger, higher-quality companies will outperform and this will be reflected in stock performance. Earnings will matter, it won't be about price/earnings ratio expansion."
(editing by John Stonestreet)