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The U.S. Treasury wants hedge fund managers to improve disclosure of hard-to-value assets and adopt audited public company-style performance reports for investors, a summary of recommendations, obtained by Reuters on Monday, shows.

They did not propose any new regulation, but chose instead to rely on market-driven due diligence and improved disclosure.

The Treasury on Tuesday is due to release hedge fund best practices guides from two committees it commissioned last year — one for hedge fund managers and one for hedge fund investors.

They were among a number of steps that the Treasury-led President’s Working Group on Financial Markets recommended in September 2007 to protect investors and reduce systemic risks posed by the growth of hedge funds while not restraining financial innovation bad credit payday advance.

The two committees started their work as financial market stress from subprime mortgage defaults were gathering steam, creating worries about investments made by the nearly $2 trillion hedge funds sector.

Among the thorniest problems in the global credit crisis is

establishing valuations for largely illiquid mortgage-backed securities lodged on bank and hedge fund balance sheets.

The Treasury group’s Asset Managers’ Committee, headed by Eric Mindich, chief executive of Eton Park Capital Management, calls on hedge funds to put in place more robust procedures for the valuation of assets, including written policies, segregation of responsibilities and other measures. 

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