Hedge Fund Group Pledges Transparency

A major hedge fund association outlined several initiatives on Tuesday for the industry to become more transparent and cooperative with regulators.

The Alternative Investment Management Association says it supports regular reporting of major fund positions that could have consequences for the global financial system. It also proposes disclosing the industry's aggregate short positions, and supports policies that would crack down on gambles like "naked" short selling, in which settlement failure is more likely.

The London-based group, whose 1,200 members manage 75% of hedge-fund assets, also called for a global regulatory framework overseen by one supervisor. AIMA proposes that the supervisor be modeled around the U.K.'s Financial Services Authority.

Amid increased pressure from regulators, investors and the public at large, AIMA says the hedge-fund industry is ready to cooperate and disclose more about its operations.

"We want to dispel once and for all this misconception that the hedge fund industry is opaque and uncooperative," AIMA CEO Andrew Baker says in a statement.

He later adds that "members recognize that it is in everyone's best interests if we cooperate fully in the important ongoing international efforts to examine and improve the supervisory framework of the future."

Because the hedge-fund industry is lightly regulated, it has come under greater scrutiny for its role in the global financial crisis.

Hedge funds have been blamed for driving down the share prices of ailing firms with enormous short positions, helping aid the downfall of Bear Stearns last spring, followed by Fannie Mae (FNM Quote), Freddie Mac (FRE Quote), Lehman Brothers, AIG (AIG Quote), Washington Mutual and Wachovia.