July 5 (LPAC)--HedgeWorld.com reported on July 3, that a recent research report by the Paris risk-management firm Riskdata shows that 30% of the hedge funds dealing in illiquid securities "smooth" their returns, i.e. they over-state their profits or under-state their losses. "Illiquid" securities are those not traded quickly and easily (e.g. stocks and bonds). Unlike liquid securities, which valuations are set via numerous transactions in their market, illiquid securities (e.g. mortgage-backed securities) are usually assigned values by the firms holding those securities. HedgeWorld says this overstating of values is a third reason for the recent meltdown of the two Bear Stearns hedge funds, beyond the frequently-cited meltdown of the sub-prime mortgage market and the over-leveraging of the funds.