Top hedge funds defend industry

By John Poirier and Svea Herbst-Bayliss

WASHINGTON/BOSTON (Reuters) - Five of the world's richest hedge fund managers defended their secretive industry to Congress on Thursday but most conceded they will have to disclose more information to satisfy financial regulators.

In a rare public appearance before lawmakers, George Soros, James Simons, John Paulson, Philip Falcone and Kenneth Griffin answered questions about how funds in the $1.7 trillion (1.1 trillion pounds) hedge fund industry use borrowed money, how much their managers earn and about their taste to keep their bets secret.

Rep. Henry Waxman, a California Democrat who heads the House Committee on Oversight and Government Reform, called the hearing at a time when hedge funds have been criticized for accelerating the worst financial crisis since the Depression.

"Currently, hedge funds are virtually unregulated," Waxman said. "They are not required to report information on their holdings, their leverage, or their strategies. Regulators aren't even certain how many hedge funds exist or how much money they control."

Hedge funds, which are delivering their worst-ever returns this year, have been blamed for contributing to the collapse of two major investment banks, Bear Stearns and Lehman Brothers, and for having kicked stock prices lower in recent weeks.

George Soros, a Democrat who left retirement at age 78 to resume running Soros Fund Management, said hedge funds played a role in the financial crisis and will suffer the consequences.

"The bubble has now burst and hedge funds will be decimated," said Soros, who earned $1 billion by betting against the British pound in 1992. "I would guess that the amount of money they manage will shrink by between 50 and 75 percent."

Soros offered a bleak outlook for the global economy.