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The change comes amid fears that the plan would benefit only a few large investors.
The move, announced on Monday, came after lobbying by hedge funds and small investors who argued the large funds that helped shape the programme, such as BlackRock and Pimco, would be its main beneficiaries.
The Treasury??s decision to amend the plan a fortnight after its creation underlines the difficulties in balancing investors?? demand for speedy measures against the need to avoid rushed moves that cause more problems.
The original ??public-private investment programme? (PPIP) stated that only funds with at least $10bn of mortgage-backed assets under management could become one of the five managers in charge of buying troubled securities from banks.
But in guidance, the Treasury said it was considering ??opening the programme to smaller fund managers with less than $10bn of eligible assets under management?, after it had selected the first batch of fund managers.
Hedge fund managers said the changes could enable smaller groups to take advantage of the cheap leverage being offered by the Treasury to entice investors to buy troubled securities from banks. ??Treasury seems to have realised the original plan would have benefited a handful of ??mega-funds??,? said one.
The authorities said they could appoint more than five fund managers in the first round and extended the application period from April 10 to April 24.