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LONDON (Reuters) - Three major hedge fund industry bodies have committed for the first time to work towards global standards, a source familiar with the matter said, as G20 ministers outlined plans to regulate the freewheeling sector.
In a letter to the Financial Stability Forum FSF.L on Thursday night, shortly before the G20 finance ministers' meeting, the three bodies pledged to draw together different industry standards on issues such as disclosure.
The next step for the groups -- Alternative Investment Management Association (AIMA), President's Working Group PWG.L and Managed Funds Association MFA.L -- will be to agree on common principles, the source said. AIMA declined to comment.
However, one body so far absent from the list of those signing the letter was the Hedge Fund Standards Board, which has set out its own voluntary standards code and whose signatories represent about half the industry in Europe.
The letter comes as the FSF puts forward recommendations to G20 finance ministers, who at the weekend proposed hedge funds or their managers should be registered and disclose information needed to assess systemic risks they pose.
Hedge funds, which have been expecting regulation for some time, cautiously welcomed the plans.
Andrew Baker, chief executive of AIMA, which represents more than 1,200 firms worldwide, said the G20's proposals mirrored its own initiatives last month for disclosure of systemically significant positions and risk exposures.
AIMA also backed a model of hedge fund manager supervision based on Britain, where the Financial Services Authority already regulates managers.
Some hedge fund managers are nevertheless wary of what the final regulatory template will look like.
"It's loads of soundbites but short on detail," said the head of one major London-based hedge fund firm, who requested anonymity in order to speak candidly, of the G20 plans.
"No hedge fund has caused the Exchequer any issues, therefore I'm not quite sure what they're worried about ... (although) deleveraging may have been disruptive, and they may be looking at that."
The developments come after growing and high-profile political pressure in recent months for tougher regulation of the freewheeling $1.4 billion (995 million pounds) industry.
British Prime Minister Gordon Brown has said the shadow banking system -- usually taken to include hedge funds -- should be brought "into the regulatory net", while German Chancellor Angela Merkel and French President Nicolas Sarkozy have recently called for regulation.
Editing by Dan Lalor