In the aftermath of recent high profile hedge fund scandals and the 2008 financial crisis, hedge fund investors have raised their expectations with respect to the degree of fund liquidity and portfolio transparency demanded from fund managers.  Heightened transparency offers investors an opportunity to more closely evaluate the risks and conflicts of interest attendant to their fund investments.  See “Eight Corporate Governance Steps That Hedge Fund Managers Should Consider in Response to Concerns Expressed by Institutional Investors,” Hedge Fund Law Report, Vol. 4, No. 35 (Oct. 6, 2011).  More preferential fund liquidity terms offer fund investors better opportunities to exit their investments, which can be a valuable tool particularly in times of financial market dislocation.  See “How Can Hedge Fund of Funds Managers Manage a ‘Liquidity Mismatch’ Between Their Funds and Underlying Hedge Funds?,” Hedge Fund Law Report, Vol. 2, No. 40 (Oct. 7, 2009).  Fund managers must be attentive to the nuanced demands of these investors, particularly in light of the heightened competition in the challenging capital raising environment.  Private fund data provider Preqin recently published two reports in which institutional investors were surveyed to ascertain their views on fund liquidity and transparency.  The first study, conducted in June 2011 (Transparency Study), details changing expectations and satisfaction levels with respect to the level of transparency being offered by fund managers; the categories of transparency being requested by institutional investors; and how and how often hedge fund managers should communicate with institutional investors.  The second study, conducted in September 2011 (Liquidity Study), details institutional investor preferences when it comes to fund liquidity terms; institutional investor expectations with respect to the length of lock-up and redemption periods; the trade-offs between illiquidity and other fund terms (such as fees) that investors are willing to make; and whether institutional investors are willing to invest with managers that imposed gates during or shortly after the credit crisis.  A fund manager’s ability to understand and adequately address the concerns of institutional investors on these two fronts can go a long way towards helping fund managers retain existing institutional investors and towards attracting new ones.  See “Certain Hedge Funds Are Using Enhanced Liquidity as a Marketing Tool,” Hedge Fund Law Report, Vol. 2, No. 22 (Jun. 3, 2009).