The guidelines call on hedge fund managers to improve their operating procedures in such areas as disclosure, valuation of their assets, risk management and guarding against conflicts of interest.
One set of the recommendations was prepared by hedge fund managers and the other was put together by investors who use the funds.
Treasury Secretary Henry Paulson said the recommendations would send "a strong message that heightened vigilance is necessary and appropriate and that all stakeholders have an important role to play."
The release of the guidelines comes at a time when a severe credit crisis has roiled financial markets with many large banks and investment houses being forced to declare billions of dollars in losses. Hedge funds have been caught up in the turmoil as investors have grown worried about the solvency of funds that invested heavily in securities backed by subprime mortgages, where delinquencies have hit record levels.
Hedge funds have grown explosively in recent years with estimates that there are now more than 8,000 funds with close to $2 trillion in assets.
They currently operate with very little government supervision, catering to institutional investors and very wealthy individuals. However, millions of ordinary people have also become unwitting investors in the funds through their pension plans.
In early 2007, a presidential working group headed by Paulson rejected the idea that the funds needed increased regulation and said what was needed was improved voluntary standards for both fund managers and investors.
In unveiling the recommendations of the advisory groups on Tuesday, Paulson said the administration was not endorsing the status quo but rather pushing for improvements that would keep U.S. financial markets competitive in a global economy.
"We want the world's highest investor protection standards, we want to guard against systemic risk and keep the United States the most competitive financial marketplace in the world," Paulson told reporters at a Treasury news conference.