The world’s top hedge funds have hit back against plans by global regulators to restrict their use of borrowing to finance trades, which the investors say has been wrongly blamed for recent financial market wobbles.

Central bankers and regulators have identified hedge funds and other non-bank actors that make heavy use of leverage but enjoy lighter regulation than banks as one of the biggest risks to the financial system.

Hedge funds use leverage to boost returns. One of the most controversial hedge fund trades, the Treasury basis trade, involves taking a short position on Treasury futures while borrowing money from a bank to take a cash Treasury position, in effect betting that the prices of the two products will converge. By levering both sides of the trade, hedge funds can magnify what would ordinarily be minuscule gains.