Alternative investment firms are increasingly the targets of M&A activity in the investment management industry, according to Jefferies Putnam Lovell.

The New York-based investment bank said that sales of alternative investment firms account for a record 40% of deals in the global investment management business so far in 2008. Through April, 29 of the 73 transactions announced involve alternative investment firms, including 20 transactions of hedge fund and fund of hedge fund managers. Deal flow in 2007 involving alternative investment firms represented 32% of the 241 total transactions in the global asset management industry.

“We expect record demand for alternative asset managers to continue throughout 2008, motivated by buyers’ search for absolute returns and innovative products in challenging capital markets,” said Aaron Dorr, a New York-based managing director at Jefferies Putnam Lovell.