It has been a scandal-packed few months for the European financial services community, with few outside of the industry having anything positive to say, but one sector, which has had to deal with negative headlines in the recent past, has come out fighting by portraying the valuable role it plays in society.

The Alternative Investment Management Association (AIMA), the global hedge fund industry association, has highlighted the important role hedge funds are increasingly playing such as managing investments for pension funds, university endowments, charitable foundations and other socially-important institutional investors.

“When people in Europe ask what social value is provided by Europe’s hedge fund industry, they are asking a perfectly legitimate question,” said Andrew Baker, AIMA’s chief executive. “And our answer to that question is really very simple. Not only is our industry responsible for 50,000 jobs in Europe, but because institutional investors are increasingly investing in hedge funds, our industry plays a major part in protecting the pensions of ordinary European citizens, boosting the resources of universities and charities and cutting the cost of insurance premiums.”

After the Bernard Madoff scandal first broke in December 2008, with the U.S. businessman pleading guilty in March 2009 to operating a Ponzi scheme considered to be the largest financial fraud in U.S. history, the perception of the hedge fund industry took a battering from the world’s media. Although Madoff did not run a hedge fund himself, hundreds of hedge funds invested in his Ponzi scheme with prosecutors estimating that the size of the fraud was $64.8 billion.

But AIMA, which this week issued a paper highlighting the social and economic value provided by the hedge fund industry, estimates that there are 50,000 people employed directly or indirectly by the hedge fund industry in Europe–the first such statistic of its kind produced–and 300,000 worldwide. Additionally, AIMA’s paper looked to debunk a number of popular myths about the industry, such as that the industry is “unregulated”, takes excessive risks and is “secretive”.

The Alternative Investment Fund Managers (AIFMD) Directive, which will, for the first time, put hedge funds and other private equity vehicles under European Union supervision, has caused some consternation within the hedge fund industry and is set to go live from 2013.

“The hedge fund industry suffered big disappointments over AIFMD, but it is coming in now and we will be prepared for it,” one hedge fund executive, based in London, told Markets Media. “But I wouldn’t say it will be a revolution, more an evolution in the way we operate. Also, the more institutional money that hedge funds attract–because they demand better quality, better systems and more transparency–means that hedge funds have had to set themselves up in a better way anyway.”

Meanwhile, hedge funds posted meager gains in June to close the first half of the year with modest gains of 1.7%, according Chicago-based Hedge Fund Research (HFR), a provider of data and analysis for the alternative investment industry.

Last month, the average hedge fund posted gains of 0.05%, according to HFR, although the benchmark S&P 500 stock index rose 4.12% in June and was up 9.48% year-to-date as of June 30.

“Hedge fund performance in the first half of 2012 reflects the challenging and volatile environment created by the combination of slowing global growth, persistently low levels of investor risk tolerance and the wide-ranging impacts of the European financial crisis across asset classes and global regions,” said Kenneth J Heinz, president of HFR.

Not all strategies have performed badly though, with fixed income-based relative value arbitrage strategies up 4.3% for the year so far and event-driven strategies up 2.4% for the same period.

“The broad based gains concentrated in relative value arbitrage and event-driven strategies reflect not only defensive positioning with regard to the European sovereign debt crisis, but caution with regard to regulatory and shareholder reaction to developments at specific financial institutions. Performance also reflects continued evolution of the hedge fund industry toward lower equity market beta strategies; we expect hedge fund industry growth to continue along these dynamics in coming quarters.”