Hedge funds are 'the scapegoats'

AUSTRALIAN hedge fund players have slammed US moves to curb some forms of short selling, saying hedge funds were being made the scapegoat for falling markets.

The US Securities and Exchange Commission's decision was a "knee-jerk reaction" to financial volatility, observers said.

John Corr, investment manager at hedge fund Fortitude Capital, said the SEC was attempting to regulate something that had been occurring for years.

"Short selling is part of the price-finding solution; sure, at times it gets overdone, but when leveraged buying pushes prices to ridiculous levels, no one complains," Mr Corr said.

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"The US is trying to bring into line what happens in the rest of the world, certainly in Australia, where it's very unusual to have very large positions without stock being borrowed."