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Alternative Market Briefing

Valuation expert observes `staggering amount of inconsistencies how hedge funds mark their portfolio`, warns `NAV valuations may be all wrong`, publishes White Paper

Tuesday, July 10, 2007

From Benedicte Gravrand, Geneva: In light of the recently-started subprime market troubles which were partly due to more or less arbitrary ratings and valuations, Espen Robak, valuations expert and president of New York-based Pluris Valuation Advisors talked to Opalesque about the valuation of illiquid assets for hedge funds.

Pluris Valuation Advisors: valuations for hedge fund “My firm is a pure valuation firm. We work mostly with hedge funds. The goal of our practice is to provide monthly updated valuations for all the illiquid securities that hedge funds bought. We specialise in PIPE securities, which U.S. and European hedge funds invest in. Warrants, convertibles, anything issued in a private placement, being as illiquid as they are, are difficult to properly evaluate. And if the valuations are wrong then that can lead to all kinds of problems down the line. That is why most of our clients come to see us.”

Remarkable inconsistency in how funds are valued “We have seen a staggering amount of inconsistencies in how various hedge funds are marking their portfolio. NAVs can be severely overvalued or undervalued, which means the volatility can be significantly understated.”

“The size of the haircut for lack of liquidity depends on the volatility of the stock, the stock price itself, on the market capital of the company that issues the stock, etc. So in a downward market, when a por......................

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