Just as things have been looking up for hedge funds this year, along comes Emil Henry, assistant secretary of the Treasury for Financial Institutions, with a downer of an industry assessment. Henry, in remarks to Washington, D.C.’s Exchequer Club, warned that hedge fund “returns will come down....” He cited the oft-mentioned factors contributing to low returns, such as too much new money and too few opportunities. And while those may be true at some point, it’s not the case at this point in 2006, when the industry is defying the doom-and-gloom predictions. He did acknowledge that a spike in interest rates and market volatility could restore returns to their former selves. As for the high fees, Henry predicted that lower returns would eventually cut the size of fees described by some as “outlandish.” On the other hand, Henry noted that fees have kept rising, evidence that investors may not care how much they pay as long as they get the returns they seek.