WASHINGTON - Two advisory groups assembled by the Bush administration proposed new "best practices" Tuesday for the hedge fund industry, designed to improve and clarify the operations of the giant pools of capital.
The guidelines call on hedge fund managers to improve their operating procedures in such areas as disclosure, valuation of their assets, risk management and guarding against conflicts of interest.
One set of the recommendations was prepared by hedge fund managers and the other was put together by investors who use the funds.
Treasury Secretary Henry Paulson said the recommendations would send "a strong message that heightened vigilance is necessary and appropriate and that all stakeholders have an important role to play."
The release of the guidelines comes at a time when a severe credit crisis has roiled financial markets with many large banks and investment houses being forced to declare billions of dollars in losses. Hedge funds have been caught up in the turmoil as investors have grown worried about the solvency of funds that invested heavily in securities backed by subprime mortgages, where delinquencies have hit record levels.
Hedge funds have grown explosively in recent years with estimates that there are now more than 8,000 funds with close to $2 trillion in assets.
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