While there have been many claims and proposals for stricter hedge fund regulation, which many experts now say is inevitable, it is yet to be deployed in the day-to-day functioning of the industry. At the G7 meeting over the weekend, two countries that have always demanded extra regulation are now pressing for it against the backdrop of a global recession.

Peer Steinbrueck, Germany's Finance Minister, says concrete progress on such measures as drafting regulations on hedge funds must be made at the Group of 20 summit in London on 2 April, which brings together leaders of industrialised nations with rising economies like China and Brazil.

On Friday last week, Steinbrueck said his government supports a French proposal to increase the regulation of hedge funds. Paris wants the European Union, and eventually all leading economies, to beef up indirect regulation of hedge funds via their prime brokers.

Under plans to be floated by Christine Lagarde, France's finance minister, banks could face higher capital requirements to reflect the 'riskiness' of their hedge fund clients. The Italian G7 presidency also said before the talks that it favoured measures that would target hedge funds and tax havens, which have also come under criticism in the crisis. In this respect, the Italian government is carefully miming the rhetoric emanating from Washington.

Demands by politicians for stricter hedge fund regulation have so far been suppressed by the financial regulators in the US and the UK, two of the biggest players in the field of alternative investment. With France and Germany continuing their tirade against hedge funds, will the authorities look at adopting stricter measures?

While the alternative investment industry continues to hold its collective breath now is the time for the industry to ponder exactly why it is under siege by the politicians. Could it be that some parts of the industry are at odds with the new era of prudent economic and financial behaviour demanded by growing numbers of voters disillusioned with endless stories of corporate excess, failure and apologies?