If your hedge fund manager offered you a 10% return for 2007 right now, would you take it? If Citigroup Alternative Investments is right, it might not be such a bad bet.

In a note, the group predicts that hedge funds will average 10% returns after fees, Reuters reports, better than most indices did last year, but trailing the Standard & Poor’s 500’s 13.6% return.

“The significant capital in the hand of private equity funds should be supportive for event-driven and merger-focused managers,” fund of hedge funds chief investment officer Ray Nolte wrote. Citigroup recommends long/short, global macro, managed futures and relative-value arbitrage strategies, as well.