Hedge funds should improve disclosure and risk management, and set up independent valuation committees, a pair of government-appointed panels have recommended, voluntary measures that have come under fire from some sectors.

The twin panels, one composed of hedge fund industry leaders and the other of institutional investors, stressed the need for hedge funds to “better evaluate and implement strong practices to better manage their businesses and reduce risk.”

“The robust practices set forth in this report will be critical to and consistent with the goal of reducing systemic risk,” the panels said in a summary of their report.

The investor committee, led by Russell Read, chief investment officer of the California Public Employees’ Retirement Committee, called on hedge funds to aspire to “comprehensive” disclosure practices, in line with those of public companies, with quarterly and annual reports, disclosure of material events and audited financial statements. In addition, Read’s group recommends that institutional investors, including pensions and endowments, should implement written procedures determining the appropriateness of hedge fund investing.

“This report calls on hedge fund to implement these rules and go beyond them by disclosing, on a quarterly basis, the portion of their assets and the performance attributable to each of the tree levels” of assets, based on how difficult they are to value, according to Eric Mindich, the Eton Park Capital Management CEO who led the industry committee. “This will go a long way to help clarify the types of assets and risks in the fund.”

Mindich added that the 10 hedge funds on his panel would adopt the voluntary guidelines in an effort to encourage others to do the same.

The Treasury Dept. will accept comments on the proposals for 60 days.

Prominent hedge fund critics dismissed the guidelines as lacking teeth. Connecticut Attorney General Richard Blumenthal called the guidelines “a virtual farce.”

“These measures leave hedge funds in a regulatory black hole,” he told Reuters.

Assistant Treasury Secretary Anthony Ryan defended the proposed guidelines, adding that his department will keep a close eye on the industry to determine their effectiveness.

“We’re going to continue to monitor best practices, see how behavior changes,” he said.