Bullmore v. Ernst & Young

Counsel for Ernst & Young Cayman Islands retained Cornerstone Research and Professor Steven Grenadier of Stanford University in a New York Supreme Court case related to the failure of Beacon Hill Asset Management, a hedge fund.

Counsel for Ernst & Young Cayman Islands retained Cornerstone Research and Professor Steven Grenadier of Stanford University in a New York Supreme Court case related to the failure of Beacon Hill Asset Management, a hedge fund. The court granted summary judgment in favor of Ernst & Young Cayman Islands and awarded costs.

The court granted summary judgment in favor of Ernst & Young Cayman Islands and awarded costs.

At issue was the fund’s net asset value for a period before its failure. Cornerstone Research supported Professor Grenadier’s investigation into the reasonableness of the prices assigned to the individual securities held in the fund’s portfolio of collateralized mortgage obligations (CMOs). Because the CMOs were illiquid, they could not be valued based on contemporaneous market transactions. The valuations utilized were based instead on sophisticated valuation models. Drawing on a deep understanding of these models, as well an empirical research on the reasonable range of valuations for these complex derivative securities, Professor Grenadier established that the prices used by the hedge fund fell within a reasonable range of valuation estimates.