Cornerstone Research was retained to investigate the valuation of a portfolio of collateralized mortgage obligations (CMOs) held by a failed hedge fund.
Cornerstone Research was retained to investigate the valuation of a portfolio of collateralized mortgage obligations (CMOs) held by a failed hedge fund. The litigation focused on the fund’s reported net asset value (NAV). Cornerstone Research staff worked with a prominent finance professor to review daily prices for CMOs in the portfolio, and to determine whether they were reasonable. Due to illiquidity of the CMOs, the initial valuations were based on sophisticated valuation models. Drawing on valuation models and empirical research on the reasonable range of valuations for these complex derivative securities, Cornerstone Research and the expert were able to establish that the prices utilized by the hedge fund were within a reasonable range.
