A trade group representing hedge funds insisted the industry, which suffered record losses last year, is not to blame for the financial crisis and warned that any moves to regulate the sector should be carried out on a global scale.

The European Commission announced last December it was to conduct a wide-ranging public consultation on hedge funds, with results produced at the end of February. In the

US, meanwhile, lawmakers have proposed tighter regulations of these funds. Since the financial crisis erupted, there have been calls to crack down on hedge funds, blamed by some for aggravating or even helping to cause market turmoil.

“While we do welcome this initiative by the European Commission, the current problems are global and therefore we believe that ultimately, a coherent, global response is needed,” Andrew Baker, chief executive of the Alternative Investment Management Association, said in a statement.

“The Commission is right to address areas of concern about the hedge fund industry. I would say that many of these issues are not unique to hedge funds and should not be looked at in isolation. It is also important to stress that the hedge fund industry in
Europe is currently regulated and that regulatory framework has shown itself to be robust in very difficult market conditions,” Mr Baker said.

He said that although the industry in
Europe and elsewhere has been hit very hard by the current crisis, it has reacted in an orderly way and not triggered systemic risks.

“Hedge funds did not cause the present market turmoil and because they have an essential role in providing liquidity to the markets, are important in assisting any eventual recovery,” Mr Baker added.

The EU consultation is part of the Commission’s review of regulatory and supervisory arrangements of financial market participants in the EU.