I suspect hedge funds will always be opaque and prefer to operate in the “shadows” for a lot of compelling reasons, maybe millions and billions of reasons. The problem that faces the hedge fund industry is the presence of some rogue traders and managers within their midst. This cannot be avoided as money always attracts the occasional rotten apple just as honey attracts flies. The very nature of hedge funds will preclude them from fully disclosing what they are doing and how they are doing it. The very big hedge funds (the ones that manage upwards of US$10 billion assets) sometimes cannot escape scrutiny from rivals and competitors since the size of their trades alone will attract attention. For example, if a certain stock is bought or traded today at a certain volume, market players will inevitably ask around about the buyer making the purchase. Hedge fund managers go around this obstacle by making several smaller trades over time and silently accumulate or consolidate their positions. Even George Soros himself considers US$10 billion as the optimum size for a hedge fund.
Anything bigger will be hard to manage as any movement tends to get magnified and also lose its lightning-quick response to seize market opportunities. Some fund managers are not registered with any of the regulatory authorities and the fear is that a big hedge fund or group of hedge funds will fail and then topple a big bank or group of banks which in turn will trigger a wider run on the entire banking system.