The world’s hedge fund industry has hit back at what it claims has been a renewed wave of unjustified criticism about these investment pools.

Although a number of hedge funds have closed due to heavy losses or have imposed lockup terms to prevent a stampede of client exits, the Alternative Investment Management Association, a business trade group, said many hedge fund managers are achieving their stated long-term goals of making an absolute return for investors in volatile markets.

There have been a number of media reports implying, Aima said, that hedge funds played a role in the share price falls of businesses such as HBOS, the UK-listed bank. An article in the Daily Telegraph, on 26 March, entitled “Hedge Funds Behind HBOS Rumours”, is the sort of item that encourages unwarranted suspicion about funds, even though this specific article contained no direct allegations against a fund, an Aima spokesman told WealthBriefing

The Financial Services Authority, the UK's financial regulator, is investigating circumstances surrounding sharp falls in HBOS's share price in March and suggestions that market participants or other parties spread false rumours about the bank to profit by short-selling its stock.

Meanwhile, a number of hedge funds have suffered amid the credit crunch. Pardus, a New York-based hedge fund manager with $2 billion of assets under management has blocked clients from pulling out their money in a bid to avoid a stampede for the exits due to volatile market conditions.

But Aima argues that problems should be put into perspective. “Disappointingly, hedge funds are often made the focus of media attention when any suspicions of market irregularities arise. It is vital that the legitimate shorting of assets should not be confused with alleged market abuse by, as yet, unidentified players in the market,” said Florence Lombard, chief executive of Aima.

Performance has been generally poor for hedge funds since the start of this year, although not as bad as would be the case for long-only funds holding equities. Hedge Fund Research, a Chicago-based research group, says that hedge funds on average earned a return of -2.21 per cent between 1 January and 3 April, based on the research group's HFRIX snapshot of returns. By contrast, the Morgan Stanley Capital International World Equity Index lost 5.9 per cent.