Hedge fund advocates tried to calm down an increasingly paranoid regulatory community Wednesday, telling an SEC-moderated conference that their products are no more risky than other investment vehicles and fail less frequently than most people seem to believe. The statements came on the first day of a two-day gathering of 70 hedge fund managers, investor advocates, attorneys and accountants in Washington. The industry, which consists of mostly unregulated offshore funds catering to the wealthy, is contending with a growing sense among regulators that its frenetic trading and short-selling has played a role in the market meltdown of the last three years. The testimony of advocates on Wednesday's first panel sought to counter some of this opinion, painting hedge fund investors as not substantively different than others. "In the recent bear market, hedge funds have outperformed traditional long-only vehicles," said Charles Gradante, managing principal of the Hennessee Hedge Fund Advisory Group. "A large part of the hedge fund investor base is interested in capital preservation; so, hedge fund managers are interested in capital preservation." Moreover, the failure rate of hedge funds is usually overstated, according to the panelists. Mutual funds are generally quoted as having a 5% failure rate, while some 8% to 14% of hedge funds close each year. But the data are misleading, they argued. Included in the 8%-14% range are hedge funds that closed simply because it was the only way the manager could make a career move, or were subject to a time limit (some hedge funds automatically close after five or 10 years). Other funds in that calculation are just closed to new capital. In reality, the amount of actual outright failures is about 5% -- no different from that of the mutual fund industry. The Securities and Exchange Commission launched a formal fact-finding investigation of the industry a year ago. Former SEC chief Arthur Levitt long advocated more stringent regulations on hedge funds, which now enjoy very little oversight. Current SEC Chairman William H. Donaldson has begun to evaluate the industry; this conference is supposed to provide information the SEC can use to determine if more regulation is warranted.