Securities and Exchange Commission Chairman William Donaldson said Friday that the agency is considering a rule requiring hedge fund managers to register as investment advisors. The move would give the SEC an oversight role in the "explosive growth of hedge funds," Donaldson said. The SEC estimates that the group of loosely regulated investment pools now controls about $700 billion in assets and is growing rapidly toward $1 trillion. According to recent data released by Tass Research, a unit of Tremont Capital Management, a Rye, N.Y., investment firm, the hedge fund industry was worth $750 billion last year, when it attracted a record $72.2 billion of new investments. Donaldson said hedge funds, which usually require a minimum investment of $1 million, now have "thresholds for investment are low enough, that the Commission needs a reliable way of collecting information on them." An SEC staff report on the growth of hedge funds last fall highlighted several areas of concern, which included the agency's limited ability to obtain reliable industry data, the emergence of registered mutual funds that invest assets in the investment pools, and an increase in enforcement cases, the chairman said, in a speech to a legal group in Washington. Donaldson also said an SEC review of the mutual fund scandal showed that hedge funds "all too often were active participants in these frauds." New registration rules "would give the Commission greater insight into the activities of hedge fund managers and improve our ability to detect and deter fraud," said Donaldson. "We have already seen that the Commission's focus on hedge funds has caused many hedge fund managers to pay more attention to their accounting and how they price securities." Some industry estimates now suggest there are as many as 9,000 hedge funds worldwide. About 6,800 operate in the U.S., according to Hedge Fund Research, a Chicago company.