Hedge funds are loosely defined in today’s marketplace, catalyzing change for those who service them.

The post 2008 revival of hedge funds have been holding steady, despite a slowdown in performance in the third quarter of 2011, but the industry’s uptake has not returned without changes.

Former defining characteristics of hedge funds, such as the implementation of esoteric strategies, is now spreading to other vehicles, such as mutual funds—loosely defining the term “hedge fund.”

“What is a hedge fund (today)? It’s a squishy term,” said Pete Cherecwich, executive vice president, head of global fund services, which includes the Northern Trust hedge fund services unit, and chief operating officer for the corporate and institutional services business unit.

“Today, you see hedge funds as 130-30 act funds,” Cherecwich said, noting the close ties between hedge funds and mutual funds in today’s market.

A 130-30 fund is a type of collective investment vehicle, often a specialty mutual fund, which allows the fund manager simultaneously to hold both long and short positions on different equities within the fund.

“Are hedge funds those that use derivatives?” continued Cherecwich, “Well…not really. Lots of mutual funds hold bank loans, and other derivatives—the reality is that hedge funds today need one platform going into the future, to be the foundation of their service provider, regardless of their distribution vehicle.”

Northern Trust Hedge Fund Services currently has 1.5 trillion assets under administration. The firm purchased Ommium LLC, the hedge fund administrator of Chicago-based hedge fund, Citadel in July 2011.

In addition to a diversification of hedge fund distribution, a change in popular strategies due to the new era of market volatility has perhaps pushed equity strategies to the side to make room for managers playing in the credit and interest rate markets.

“Clients are demanding an interactive system with an independent, robust capability to administer, and fulfill accounting needs, all with transparency, across all asset classes,” said Peter Sanchez, chief executive of Northern Trust hedge fund services.

“Funds are moving from equity to multi strategy, including how to get credit and interest rate exposure, and all of the hedges that accompany those strategies. Providers need to account for the demanding growth in asset management—a growth in strategies, and products.”