LONDON (AP) — Leading British hedge fund executives denied yesterday that they have been profiteering from the turmoil inflicted by the world financial crisis on the country's banking system, even while conceding they have a major public relations problem.

Testifying before a committee in Parliament, the traditionally media-shy executives said most of the blame for the drop in bank shares and subsequent taxpayer bailouts had to be put squarely on the banks themselves and the failure of shareholders to keep the boards in check.

"You can see the huge destruction of wealth that has taken place in these companies, and I do not believe that it's down to short-selling of their shares," said Stephen Zimmerman, chairman of NewSmith Asset Management, which has around £2 billion ($2.8 billion) of assets under management.

Short selling involves borrowing and then selling shares in a company on the expectation that its share price would fall. It was blamed for dramatic falls in the value of HBOS stock in 2008 that ultimately led to its rescue by Lloyds TSB, now known as Lloyds Banking Group PLC.

But the Financial Services Authority, the industry's regulator, found no evidence that rumours were spread about the bank to manipulate its share price.

Hedge funds — usually investment vehicles for wealthy individuals and institutions — have been vilified in recent months, particularly in the British tabloid press, for short selling British banking stocks, which have slumped amid fears about their potential exposure to the plummeting US housing market.

The executives' evidence followed a report in The Financial Times that New York-based hedge fund Paulson & Co made a profit of at least £270 million through the short-selling over the past few months of Royal Bank of Scotland Group PLC — which is about to be 70 percent owned by the government after massive losses.

Paul Marshall, chairman of Marshall Wace, one of Britain's largest hedge fund groups with 5 billion euro ($6.59 billion) under management, denied accusations from Treasury Select Committee chairman John McFall that the industry was making "shed loads of money" during the crisis.

Marshall said the hedge fund industry has lost 18 percent of its value globally over the last year. "Blaming hedge funds is like blaming the passengers on a bus crash," he said.

However, Marshall agreed that Paulson's windfall profit would not help the industry's image but stressed that such reports were only a "very partial" representation of what is really going on. Typically, he said, hedge funds bet on both rises and falls in prices in a sector and were suffering like all other investors in the current investment environment.

Douglas Shaw of hedge fund giant BlackRock noted that some of the biggest buyers in the Northern Rock bank, before it was nationalised by the British government, were hedge funds.