Reuters reports that European hedge funds are slow to sign on to the voluntary operating principles developed by the newly-formed Hedge Funds Standards Board. While it is complex to adopt the operating principles outlined by the HFSB, the industry needs to follow the lead of the original 14 signatories. European funds risk further regulation by not signing on.

The hope is that the aegis of the HFSB will promote best practices in the industry, head off unsound regulation, and help defend the industry's reputation, which in Europe is even more beleaguered than in the U.S.

Reuters notes that hedge funds are "widely mistrusted in continental Europe, where senior German politicians have branded them as "locusts", new rules may seriously constrain hedge funds' activities, perhaps limiting the stakes they can build up in firms or curbing their ability to short-sell investments."

Antonio Borges, chairman of the HFSB warns that "we should not underestimate the fact that there is in some segments, especially in the political world, a movement in favour of very tough regulation, which I think would be quite detrimental to everybody."

In such an environment, the industry needs to take visible and meaningful steps to demonstrate that it is taking the lead in promoting prudent operating standards. Building consensus on the value of the HFSB is an important part of that process.

The Wall Street Journal also chimed in on this topic.