Last week, Castle, R-Del., introduced a bill requiring a White House study group to make recommendations about disclosure requirements for the big investment pools.

"Regulators need to explore hedge funds and the potential risks they pose to financial markets and investors," said Castle, a member of the House Committee on Financial Services. "Transparency in our financial system is important for market discipline and investor confidence."

Castle's statement comes the same day that Greenwich, Conn.-based hedge fund Amaranth Advisors LLC said it suffered big losses on natural-gas investments and is eliminating positions in the volatile commodity. See full story.

In a letter signed by Amaranth founder Nicholas Maounis and made available to MarketWatch Monday, the fund said it could be down more than 35% for the year to date when the natural-gas positions are unwound.

"We have met every margin call to date. We are in discussions with our prime brokers and other counterparties and are working to protect our investors while meeting the obligations of our creditors," Maounis wrote in the letter, addressed to investors.

Early last month, MotherRock LP, an energy hedge fund run by the former president of the New York Mercantile Exchange, said it was shutting down also after suffering big losses in natural-gas markets in recent months.

Hedge funds, a more than $1 trillion industry once typically targeted toward wealthy investors, have drawn scrutiny as they have become more accessible to average investors.

Last month, Securities and Exchange Commission Chairman Christopher Cox told a Senate committee that his agency's working on new rules about regulating the private investment partnerships. He said the investor-protection agency won't appeal a court ruling overturning a rule requiring hedge-fund managers to register with the SEC as investment advisers. See full story.

Cox aso said one proposal is a new antifraud rule that would effectively "look through" a hedge fund to its investors.

Moreover, the SEC's considering increasing the minimum income and asset requirement for individuals who want to invest in hedge funds, Cox added.

Castle's bill calls on the President's Working Group on Financial Markets to study the type of information that the funds should disclose to the public; the potential risks that hedge funds pose to markets and investors; whether hedge-fund investors are able to protect themselves from risks associated with their investments; the growth of pension funds investing in hedge funds, and other issues.

In an interview Monday afternoon, Castle acknowledged Congress has few days remaining before the November elections but said he was confident lawmakers would produce hedge fund-related legislation within a year.

"There's a lack of information available to people that have to make decisions," Castle said.