Released on = June 26, 2007, 11:36 am

Press Release Author = Public Watchdog

Industry = Law

Press Release Summary = Hartley Bernstein, a New York-based attorney, warns that the
recent hedge fund tremors may lead to a major disaster for small investors.

Press Release Body = Hartley Bernstein, a New-York securities lawyer and founder of
securities watchdog website, StockPatrol.com, is asking - \"Is the sky really
falling?.\" \"Or,\" as Mr. Bernstein notes, \"is a lone bird circling overhead, dropping
nasty messages on our heads?\"

Mr. Bernstein\'s questions come in the wake of concerns about the fate of two Bear
Stearns hedge funds and the implications that their tenuous standing may have on the
broader market. In a commentary on StockPatrol.com, Mr. Bernstein wonders whether a
pending crisis in the capital markets has been \"averted, postponed, or fatally
ignored as we whistle past the investment graveyard.\" As is usually the case on Wall
Street, investor sentiment, and a nervous marketplace are likely to play a key role
in the course of this predicament.

Hartley Bernstein points to a recent Wall Street Journal article, which pointed out
that risky hedge funds have become heavily weighted with illiquid investments. \"In
part,\" Bernstein explains, \"this has allowed hedge fund managers to value fund
assets aggressively - using high-water marks for risky instruments and esoteric
holdings.\" This in turn can benefit the portfolio managers to the extent their
compensation is keyed to fund value. \"But are some asset appraisals illusory and, if
so, will funds eventually be called upon to answer for arbitrary valuations and
possible conflicts of interest?,\" Mr. Bernstein wonders.

As the StockPatrol.com article points out, \"hedge fund lenders could hold the key to
this Pandora's Box.\" Again, as the Wall Street Journal notes, when leveraged
investments begin to suffer substantial losses, a fund's lenders may demand more
collateral or seek repayment of outstanding loans. Funds that invested heavily in
complex securities backed by failing sub-prime mortgages are feeling pressure from
lenders.

Mr. Bernstein expressed concern over potential effect of hedge fund failures on
smaller investors. \"It would be easy to dismiss the potential losses as just one
more foreseeable risk assumed by sophisticated hedge fund investors,\" Mr. Bernstein
stated, but \"unfortunately, repercussions are seldom so simple and victims are never
that discrete. With cash flowing freely in recent years, a broad range of investors
have jumped into hedge funds and their promise of even greater riches.\" The Wall
Street Journal recently reported that institutional investors, including pension
funds and endowments have increased their investments in hedge funds and other less
liquid instruments. As StockPatrol.com noted, \"Individual beneficiaries of those
institutions may have little notion that their personal worth is tied to illiquid
investments that could range from imaginative packages of risky real estate to
timberlands. Or that a flash fire of creditor panic could jeopardize the value of
their holdings.\"

Bernstein warns that small investors may find themselves at loggerheads with hedge
fund managers - and with institutional portfolio managers as well - if these risky
investments were not suitable in the first place. A rash of lawsuits from investors
can be expected as losses mount.

And Bernstein wonders, \"Should we have seen it coming - as we looked up in the sky
at the bird hovering overhead? Would investors be sufficiently forewarned if they if
a fund were named "The Highly-Speculative, Riskiest Possible, Kiss Your Money
Goodbye, You Need To Be Out of Your Mind to Invest" fund? Or like the cartoon
Roadrunner and Coyote would they continue to race past the sign that says "Danger
Ahead. Road Ends Here" and jump off the cliff?\"

Hartley Bernstein is a New York attorney whose practice includes representation of
investors who have been victimized by corporate fraud, improper investment practices
and stock scams. Mr. Bernstein is also the Founder and Publisher of StockPatrol.com,
which is widely-recognized as a leading watchdog for investors.


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