Reuters – The days of hedge funds as a red-hot asset class may be cooling, according to a new survey released by fund research firm Morningstar on Monday.

Nearly half of all financial advisers who help wealthy people invest their money said they expect hedge funds to become somewhat less or much less important in clients’ portfolios in the next five years. Among institutional clients like pension funds, 37 percent of those polled said they expect hedge funds to become somewhat less or much less important.

Wealthy investors and pension funds helped hedge fund industry assets double to $1.7 trillion in the last three years, but recently the loosely regulated portfolios have disappointed investors with their worst-ever returns.

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New York Post- Wall Streeters who suspect that hedge funds are behind false rumors about Lehman Brothers and other banks say they’re skeptical that regulators will be able to find and punish those responsible.

"I would love to have someone pinned and pilloried for doing this stuff," said one investment pro who says he is constantly battling merger rumors. "But it’s hard to believe it’s going to be effective."

The doubtful commentary refers to the Securities and Exchange Commission’s oddly timed announcement Sunday that it plans to crack down on false rumors spread by broker-dealers and financial advisers.

The SEC said it will examine controls and procedures at these outfits to ensure they’re doing what they can to prevent a practice that, legally speaking, counts as market manipulation.

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