In an attempt to head off regulation, hedge funds in Europe are proposing that they will voluntarily become more transparent about their holdings, risk management, governance and valuation techniques, The Wall Street Journal reports.

Both the U.S. Treasury and a hedge fund advisory group created by the President’s Working Group on Financial Markets are carefully monitoring this latest development in an industry scarcely regulated. “Anytime a group of industry leaders steps up and takes on responsibility to help advance best practices, it’s of service and benefit to the marketplace,” said Eric Mindich, chairman of the advisory group and head of hedge fund Eton Park Capital Management.

The suggestions are coming out of the Hedge Fund Working Group, comprised of 14 leading hedge fund companies, including Man Group.

It is “pretty difficult to coerce” hedge funds to do anything, said Man Group Chairman Stanley Fink, but if some funds begin to sign up for the best practices and investors begin to demand greater transparency, the movement might gain some traction.

But some politicians are not moved by the development. Poul Nyrup Rasmussen, president of the European Socialist party at the European Union Parliament, said, “Voluntary standards are not enough. What we need now is for regulators and policy makers to independently assess the regulation of hedge funds.”

The Group of Eight nations has been pushing for more disclosure of hedge fund holdings as well as a ratings system, like that used for debt.

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