Published by the European School of Management and Technology (ESMT), the study pointed to the volatility of in performance of such funds and the tendency of operators to make decisions based solely on past results.
With the European Commission preparing to issue its new directive on alternative investment funds, ESMT assistant professor Guillermo Baquero said such a crackdown should be welcomed.
"We should not be scared to tighten the regulatory screw on the hedge fund industry and force considerably greater disclosure," he commented.
"Now is the time to discuss deep, substantial and effective regulation."
The Alternative Investment Fund Managers directive, which was provisionally approved by EU finance ministers last month and should face a full vote in July, has been heavily criticised by members of the hedge fund and private equity industry.
About 80 per cent Europe's hedge fund operators are based in the UK.
By Gary Cooper