The head of the main lobbying group for the hedge fund industry has essentially told his mutual fund counterpart to mind his own business following the latter's speech that "predatory trading strategies" by hedge funds have victimized mutual fund investors. The spat between lobbyists underscores the degree to which increased Securities and Exchange Commission scrutiny is affecting both the $7 trillion mutual fund industry, which has seen its reputation take a pounding since the revelation of late-trading and market-timing abuses last fall, and the trillion-dollar hedge fund industry, which wants to ward off increased regulation by the government watchdog. Jack Gaine, president of the Managed Funds Association, the main hedge fund lobbying group, said he was disappointed by remarks made Tuesday by Paul Schott Stevens, the new president of the Investment Company Institute. He took particular issue with a comment that hedge funds used market-timing strategies "to pick the pockets of long-term mutual fund investors." "We recognize the daunting magnitude of the undertaking Mr. Stevens must be facing so early in his tenure and understand his desire to assign responsibility for the significant and pervasive misconduct in the mutual fund industry," Gaine said. "We believe the ICI could better serve and protect the 95 million U.S. investors who own mutual funds today by focusing on the structural reforms necessary in the mutual fund industry to ensure that recent misconduct is prevented going forward." Hedge fund insiders have long blamed the mutual fund industry for the SEC's recent rumblings about stepping up regulation, noting that former Chairman Harvey Pitt began an exploratory investigation of hedge funds in 2002, not long after former ICI head Matthew Fink singled out the largely unregulated funds as a source of concern. But because they are generally closed to all but institutional investors and the very wealthy, hedge funds aren't subject to the same oversight as mutual funds -- and the MFA wants to keep it that way. At a conference earlier this week, hedge fund manager James Chanos said his industry's rapid growth has encouraged the wandering eyes of government bureaucracy. "They believe that because there's $1 trillion invested out there, there must be something to regulate," he said.