US politicians have called for tighter regulation of the hedge fund industry after the $6bn (€4.7bn) losses in the gas futures market last week by Amaranth Advisors. However, the lack of widescale fallout from Amaranth and the Congressional elections this year mean that regulators are expected to avoid a knee-jerk reaction.

But Connecticut attorney-general Richard Blumenthal, who oversees the state where many hedge funds are concentrated, said: "The mammoth loss by Amaranth is compelling evidence of the need to reform disclosure and oversight requirements." US congressman Mike Castle wants the president's working group on financial markets to study whether hedge funds are a risk to the national economy and to recommend disclosure requirements. Amaranth's losses come on the heels of last month's collapse of another commodities-focused hedge fund, MotherRock, and the blow-up this year of Refco. These should have set off warning bells for regulators, according to University of Maryland professor Michael Greenberger, a former director of the division of trading and markets at the Commodity Futures Trading Commission. Greenberger criticised Amaranth's use of electronic futures markets for almost two thirds of its trades. "Amaranth never would have been able to amass that big a position on an overseen US exchange. I sense a bipartisan concern with this and it will be broad enough that there are changes made," he said. A hedge fund manger in London said: "The big concern in the hedge fund community is that regulators may use the lack of effective risk management at Amaranth as an excuse to clamp down on the rest of the industry, even though the spillage into the rest of the market has been minimal." Amaranth won a regulatory exemption from the Ontario Securities Commission, which gave the hedge fund a three-year exemption to the Commodity Futures Act in Canada. It allowed Amaranth to warn prospective Canadian investors about the difficulties of enforcing legal rights because of non-resident funds.