DealZone

It seems the UK Treasury Select Committee's very public chastisement of the hedge fund industry in January has had some effect.

At the time, MPs zeroed in on the Hedge Fund Standards Board (HFSB) in particular and the relatively small number of funds it had signed up -- 33 in December -- even though these funds accounted for half of the European industry.

"You've attracted 20 fresh members in a year. If I was a trade union officer on recruitment I'd be sacked," quipped Committee member George Mudie at the time.

However, things have moved on and firms have been -- if not rushing -- at least moving slightly more speedily to sign up.

With regulation at a European and international level looming, hedge funds are increasingly aware of the need to be seen to be imposing best practice standards.

The timing of the Alternative Investment Management Association's hedge fund disclosure initiative indicates just how strong the winds of change are blowing in hedge fund land.

Coming just a day after ECB President Jean-Claude Trichet called the credit crisis "a loud and clear call" for extending hedge fund regulation, the move shows the hedge fund industry feels it must be more active in deciding the future shape of regulation.

The move, which will include regular -- probably quarterly -- disclosure of systemically significant holdings and risk exposure to national regulators, goes further than that suggested at last month's Treasury Select Committee by Marshall Wace chairman and Hedge Fund Standards Board trustee Paul Marshall, who had proposed aggregating data through prime brokers.

Tuesday's grilling of UK hedge fund executives is likely to create plenty of noise but produce little in the way of new rules.

While media-shy TCI founder Chris Hohn and others will face tough questions from the Treasury Select Committee on financial stability, short-selling and other issues, it nevertheless seems that the pro-legislation lobby's position may be weaker than it has been in recent years.

For one thing, many hedge funds simply do not have the financial clout -- and therefore carry the associated risks seen by some politicians -- that they once did.