Hedge funds that invest in distressed situations fared well in 2006, returning 13.4 percent. But will that continue into 2007? Well, some think it will. The industries where they will see some good opportunities include auto suppliers, airlines, home building and sub-prime lending. All face some well-documented turbulence. However, any gains could be dampened or delayed by a recession. As for other asset classes, currency funds and energy funds are poised for a rebound perhaps. And some think that overseas equities-oriented funds are also likely winners. That said, the winners will be determined by individual managers.

For more:
- here's an update at Financial News