Evening Standard – Veterans of the secretive $1.5 trillion (£1 trillion) industry say the $50 billion Madoff fraud could bring about sweeping changes in the way the authorities monitor activity.

"This is an Enron moment for hedge funds," said Peter Rup, chief investment officer at New York hedge fund Orion Capital Management. "Regulation would be welcome, primarily from a trust standpoint."

Enron, once the world’s largest energy-trading firm, collapsed in 2001 amid allegations of accounting fraud. Less than a year later, US lawmakers passed the Sarbanes-Oxley Act, which set tighter corporate accountability rules for publicly traded companies.

Suggestions for rule changes for hedge funds include strengthening whistleblower programmes and imposing capital requirements similar to those for mutual funds. Rup and others argue this would restore confidence in the market.

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Hartford Business – State Treasurer Denise L. Nappier said she plans to approve rule changes by January allowing her to allocate up to 8 percent of the state’s $20 billion pension fund in nontraditional investments such as hedge funds.

The move marks a departure from a more conservative investment strategy and comes shortly after the Connecticut funds lost nearly $5 billion in pension assets in the depressed market.

The shift in approach also comes when the hedge fund industry is under stress. The sector’s total assets declined by more than 20 percent between June and October, and the unraveling of Bernard Madoff’s $50 billion Ponzi scheme this month has spotlighted what many see as a general lack of transparency in the industry.

Still, Nappier said investing in hedge funds and other alternative instruments will allow the pension plan to reduce volatility, produce slightly higher returns and create better diversification.

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