Pity the poor superannuation fund investor. Most, if not all, are facing a miserable month or two as they receive news of a big slump in performance. It will be the first negative year’s returns in six years.

And while there’s ample reasons for that: the credit crunch, slowing economy, high oil prices etc, some of that poor performance might have been worse than it should have been.

For that you can blame the activities of hedge funds and others who have been shorting the shares of high profile companies with financial or earnings problems.

Those hedge funds can short because they borrow shares from fund managers and others for a fee. However, Crikey understands that in some cases the members of the funds whose shares are being lent are being stiffed by their managers who effectively pocket the fees rather than pay it into the general revenue account for the fund as a whole.

This week has seen hedge funds and other big investors attack the share prices of two major companies deemed to have stuffed up: property giant GPT and diversified industrial CSR.

Fund managers said both companies were attacked by hedge funds seeking to capitalise on investor concerns about the earnings for both companies.

One fund manager said this raised very serious questions. Who benefits when shares in troubled companies are overly punished?

Hedge funds don’t usually short naked without possessing the shares, but prefer to borrow them for a fee.

Sometimes the shares get delayed and there is a failure to settle, as we saw with Tricom in January when it could not settle transactions in Allco Finance on two days.

But who gets the fees the hedge funds pay for the borrowing of the shares?

The money should be paid into the general revenue of the fund for the benefit of all members with accounts and the managers.

But one experienced fund manager told me that he knows of quite a few cases where the borrowing fees are used to benefit the managers of the fund. The money is netted off against running costs, in a way similar to the payment of soft dollar commissions by fund managers and brokers for supplying services like Bloomberg and Reuters information systems.

When the borrowing fees are paid that way, they reduce the costs of the managers, and enable them to make more money when the benefit of the income should be going to the fund’s members generally.

The key regulator for super funds isn’t ASIC or the ASX, but rather APRA and it should issue a directive to fund managers that all income from lending, leasing or dealing in shares owned by the funds, has to be paid into the general revenue account for the benefit of all members.

After all the managers already charge whacking great fees and will still do very well out of the slump, unlike their customers.