Emerging Market Hedge Funds are in Full Swing Studies Show.

Hedge funds that specialize in emerging markets rose 20.49% in 2006, according to new data, and mergers and acquisitions in emerging markets reached a record value of $635.4 billion in 2006 via 10,995 deals, according to data company Dealogic. China was the busiest emerging market with deals worth $104.3 billion, an increase of 69% on 2005. Russia and South Korea followed with $98.5 billion and $42.3 billion worth of deals respectively.

The MSCI Emerging Markets index rose 29.2% last year, Oliver Schupp, president of the index said in a statement, "Record highs in global markets and mergers and acquisition activity along with a stronger than expected earnings season, a pause in the continual increasing of interest rates by the Federal Reserve, high energy prices and volatility fluctuations were positive contributors to hedge fund performance in 2006."

The average emerging market fund beat out all other individual hedge fund strategies, according to numbers published by New York-based Credit Suisse's Credit Suisse/Tremont Hedge Fund Index. Hedge Fund Research Inc. said the average hedge fund gained 12.99%.