"The amount of funds invested in the hedge fund industry will quadruple in the next seven years," predicts forum co-chair Roger Lorence, director of tax services at Eichler Bergsman & Co. "The rumors of thousands of hedge funds closing in the next six months have been wildly exaggerated."

However, the roster of hedge fund experts at CPE INC.'s first Hedge Fund Forum agreed that the industry does face significant new concerns. Richard Marshall, partner at Kirkpatrick & Lockhart, described the SEC's ongoing fact-finding inspection sweep, cautioning participants that it could lead to enforcement actions and regulatory changes.

Ron Carletta, supervisory auditor for the CFTC, addressed the CFTC's reorganization and move into more of an oversight role to ensure compliance with GAAP, the Patriot Act and other requirements.

Thomas Ayers, audit partner at Deloitte & Touche, gave an industry update on the debate surrounding issues such as registered vs. unregistered advisors, possible conflicts of interest regarding hedge funds and mutual funds and the latest standards and procedures to prevent fraud.

Jonathan Smeltz, tax partner at Grant Thornton, outlined current developments in the taxation of investment partnerships and products, including the emerging treatment of short sales, straddles, wash sales and substantially identical debt securities.

The experts' overall conclusion was that despite ever-increasing scrutiny by regulators, the future for hedge funds looks bright as long as the industry continues to scrupulously monitor itself regarding strict compliance with both existing requirements and those on the horizon.