CHICAGO - The Morningstar 2010 Investment Conference started with a thud Wednesday as hundreds of advisors and fund managers gathered to listen to the industry's best and brightest, only to be bombarded by pessimistic messages from fund managers such as Double Line Capital’s Jeffrey Gundlach.

He forecast radical policies out of Washington that would include higher taxes designed to lower the federal government’s astronomical debt. He warned that deflation and the $787 billion in debt overhang, which he called the “elephant in the kitchen,” will continue to impact investor for the next five years.

Attendees seemed surprised by the level of pessimism from Gundlach and others, who although they work in the financial services industry, seem to think the sky is falling and investing is more risky than ever.

“Equity fund managers make their living by having people invest in stocks,” said Ryan W. Kruger a partner at Hamilton Financial Partners in Tulsa, Oklahoma, and an attendee at the conference. “Yet they weren’t talking as much about the opportunities they saw. It was more about the risks they saw.”

Kruger said he would expect that type of doom and gloom from economist Nouriel Roubini, who was nicknamed Dr. Doom for his pessimistic outlook. But equity fund managers are supposed to be optimistic and talk about growth and opportunity.

Even the emerging markets, which have been the pride and joy of many clients’ portfolios, were labeled as risky by some because the expectations for their performance have become so overblown.

“We’re not sitting on the sidelines in terms of emerging markets but we are deciding whether to dial up or dial down investments in emerging markets,” said Kruger. “Overall people still say there are good opportunities but there are still risks of results versus expectations.”

“We [the U.S.] are going to become an emerging market,” predicted Rudolph Riad-Younes, head of international equities at Artio Global Investors, New York, in the opening general session of the conference on Wednesday.

Steve Romick, partner, FPA, Los Angeles, said although there are opportunities, there are “slim pickings.”

Daniel O’Keefe of Artisan Partners in San Francisco, said the pessimism isn’t unwaranted.

“There are many issues to face in the global economy," he said. "There are historic fiscal debts. We are facing the inevitability of austerity measures and the depressive impact on economic growth. Americans are worried and this creates an environment of fear. Fear is opportunity for those with a long-term view as investors. But I don’t think there is as much value as there was in 2008.”