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Bnp Paribas Funds A Non Story With Big Consequences

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by Felix Salmon
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Aug 09 2007 12:00am EDT

BNP Paribas Funds: A Non-Story With Big Consequences

Why all the fuss about these BNP Paribas funds? They're long-only funds which own some very illiquid paper, and as a result they're impossible to value accurately. If someone wants to withdraw money from a fund, you first have to know how much the fund is worth. Since the fund managers don't know how much the funds are worth, they're not letting people withdraw money until they do know how much the funds are worth. There is no chance of the funds being wiped out, like the Bear Stearns hedge funds were, since they're long only.

And yet stock markets around the world are falling in response to this non-news, there's a flight to quality, and BNP Paribas stock has dropped over 5% – despite the fact that it's other investors' money we're talking about, here, not BNP Paribas's own. All I can conclude from this is that the market is very, very nervous, and will sell on just about anything.

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