Portfolio Valuation

Hedge funds are estimated to buy nearly 80 percent of the securities issued in PIPEs. Many of these securities are bought by PIPE funds or specialized hedge funds that invest in restricted securities. Such securities are often bought with the expectation of having a registration available to allow resale in three to six months after the PIPE. In the meantime, some funds, but not all, hedge their positions through short selling. Whether or not such positions are hedged, each position is typically accounted for at “fair value”, which is defined by SFAS 157.