It’s rare that a true major shift in any industry can be readily recognized at the moment it is taking place, but such a moment seems to have been recognized for the hedge fund industry as a prolonged economic downturn has both shattered and affirmed a number of assumptions and forced both investors and hedge fund managers to reassess the value they seek, on the one hand, and the value that they can—and must—provide, on the other.

It was long assumed, for example, that long/short equity managers who have traditionally made up the bulk of hedge fund offerings, tended to be net long and reliant on beta to a far greater degree than they would have investors believe. That has proven to be all too accurate in far too many cases. The use of leverage—where all the problems in global markets begin and end—was likewise widely considered responsible for providing a great number of hedge funds with better returns than the skill of the managers running them could take credit for. That view has also been shown to have been painfully accurate. News twists on hedge funds, such as 130/30 strategies, have in most cases similarly been revealed as incapable of providing real value when expectations are highest.

On the positive side, strategies such as global macro, active commodity funds, CTAs and experienced distressed managers were presumed to be those that could thrive in an excessively volatile and uncertain environment, and for the most part they have delivered for investors. In addition, a variety of hedge fund management firms that boasted of having generally superior risk models, policies and procedures demonstrated by their results that they actually did, though certainly that wasn’t true in all cases.

Then again, both hedge funds and funds of funds often suffered through no fault of their own during this period when unusually difficult conditions have prevailed, whether because credit markets where liquidity should naturally exist froze, access to leverage, even reasonable leverage, was withdrawn, or investors in need of cash to cover other positions were forced to redeem.

Now, as institutional investors begin to review the hedge fund landscape, they are seeing a vastly changed and evolving industry marked by fewer funds, an increase in the concentration of assets among the largest firms, substantially reduced aggregate assets under management, chastened managers, and the impact, immediate and projected, of less easily available leverage, new regulations, and the diminished use of derivatives that have revealed themselves to be both valuable tools that can also increase hard to define and quantify risks.

What will these and other changes mean for investors as they consider ways to build, manage and rebuild their hedge fund portfolios? Will there be stronger demands for greater transparency and more thorough due diligence, as well as ongoing monitoring, to review such things as the use of leverage, the counter-parties funds are dealing with, and the risk tools and polices they are utilizing to protect their downside? And how will investors themselves reexamine their own understanding of risk assessment, the benefits of portfolio diversification, and the skills and experience they consider necessary in selecting managers? What will be their broad consensus as it regards the relative performance of the hedge funds that were in their portfolios during this period of major market dislocations when compared to both their traditional and other alternative investments? Will there be demands for lower fees and other favorable terms that some hedge funds have already begun to offer to attract and retain clients?

Beyond these generalized issues, in the near- to medium-term will the performance of the distressed security fund sector match expectations, or will it be more constrained by crowding and other factors? Will the outsized opportunities presented for global macro managers continue to exist for an extended period of time? How long might that be? How will limits on leverage impact returns for strategies that rely on it? How will that affect the decisions and demands of investors?

The Hedge Fund Investor Symposium will examine these issues through a series of panel discussions and workshops to foster an enhanced understanding of how appropriately constructed hedge fund portfolios may continue to add value and assist institutional investors in meeting their long-term goals in a new era for the industry.