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Doug Krizner: When the stock market swooned this summer, hedge funds were hard hit. Many made the same lousy bet in subprime mortgages. But it wasn’t clear then, because the nature of hedge funds is to act in secret.

Now, there are calls for rules on greater transparency. That’s made a group of Europe’s biggest hedge funds uneasy, so they’ve come up with a voluntary code of conduct. Kyle James reports.

Kyle James: The proposed code would require funds doing business in Britain to disclose the full stakes they own in companies, their plans on dealing with liquidity risk, and their governance policies, such as dealing with conflicts between investors and managers. This pre-emptive move comes in the wake of increasing calls for government regulation, which are especially loud in Germany.

Andrew Hilton is the director of the Center for the Study of Financial Innovation. He says although the plan is an exercise in self-policing, there’d be pressure on funds to get on board.

Andrew Hilton: The intention is that you’ll either comply with the code of conduct, or if you don’tm you’ll have to explain why you don’t. I think that the feeling is that it would drive investors away, that people would shy away from funds that neither complied nor explained.

The proposal is being closely watched in the U.S., where the Treasury Department has two groups looking at the issue and has been in contact with the U.K. about the code.

I’m Kyle James for Marketplace.