Despite the difficulties facing alternative investment firms—or perhaps because those troubles make them a bargain—the market for them couldn’t be hotter.

Sales of alternatives firms have accounted for 40% of mergers and acquisitions in the global investment management business this year, according to Jefferies Putnam Lovell. The proportion represents a record: Last year, deals involving alternatives firms represented 32% of asset management M&A.

“We expect record demand for alternative asset manages to continue through 2008, motivated by buyers’ search for absolute returns and innovative products in challenging capital markets,” Putnam Lovell’s Aaron Door said.

Of the 73 asset management deals in 2008, 29 involve alternatives firms, including 20 hedge funds or funds of hedge funds.