Calling agents Mulder and Scully.

Calling agents Mulder and Scully. At a time when scrutiny of hedge fund and private equity activity is at record levels, the Federal Bureau of Investigation, the primary investigative arm of the US Department of Justice, has joined the fray. It seems that the FBI may delve into the dealings of some alternative fund managers as part of a fraud investigation into the US mortgage meltdown.

FBI director Robert Mueller says the agency's investigations into the sub-prime loan meltdown may uncover financial crimes such as possible insider trading by investment managers at hedge funds and private equity firms. It is also reviewing whether hedge funds improperly hid losses on securities tied to sub-prime mortgages.

Is this something inevitable? Hedge funds now have had everything but the kitchen sink thrown at them - German ministers calling for extra regulation, the Australian and Icelandic crackdowns on short selling, and now a potential FBI investigation. It sounds like a plot for a Hollywood blockbuster.

Will heightened scrutiny lead to a knee-jerk reaction by authorities with regard to increasing regulatory and disclosure requirements? That is the last thing the industry needs.

The US authorities appear to be searching for a scapegoat for the sub-prime loans fiasco. The truth is out there. But we suspect it has less to do with hedge funds than with the banks that loosened their credit controls and lent money irresponsibly.