Due Diligence and Valuation Policy Caveat Emptor Squared
A PIPE fund manager without a written valuation policy in the hands of both a third-party administrator and an auditor is the equivalent of a kid with a candy jar in his bedroom.
There are many ways to reduce risk in a PIPE fund. Clearly, due diligence prior to investing in a company is one method to lower the risk of substandard performance. Others include diversification among different industries, avoiding concentration in one particular issue, minimizing the amount of illiquid securities in a portfolio, and even using a variety of different structures (i.e., convertible notes, convertible preferred, common stock, warrants, ...