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
, 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.
have been blamed for driving down the share prices of ailing firms with enormous short positions, helping aid the downfall of
last spring, followed by
Bank of America
have also seen big increases in short positions as they struggle. Although it's unclear how much hedge funds account for those increasing short positions, mutual funds are not allowed to place short bets.
In an effort to stem the wave of short bets, regulators across the globe placed restrictions on
, and some, like the
Securities and Exchange Commission
short positions on select companies with financial operations. The SEC also asked some major hedge funds to disclose their trading positions to get a better handle on the situation, though those data are not available publicly.
Hedge funds -- once marketed as posting "alpha" returns in any climate -- have been hammered by the global financial crisis, with overall returns dropping nearly 20%
. However, Morningstar on Tuesday became the latest group to note the industry's relatively buxom performance in
. The Morningstar 1,000 Hedge Fund Index fell 1.2% last month, while a currency-hedged, composite asset-weighted index gained 1.2% That compares with similar global indices dropping 8.9% and 3.3%.
Although returns have remained much better than the broader markets, and have since turned positive again, investors remain disappointed, and many are
their funds back. As a result, some hedge funds have also been forced to
huge positions -- whether to meet
requests , or outright liquidation. Those forced selloffs have fueled the market rout of recent months, which has sent stocks down to levels not seen in over a decade.