# kaal:claim:1428387-009

**Claim.** Because net asset value drives subscriptions, redemptions, performance calculations, advertising, and fees, managers who both manage and value the portfolio have both an incentive and the ability to inappropriately over-value their portfolios.

**Type.** mechanism  **Support.** argued

**Holds when.**

- where the manager performs or controls valuation
- where NAV is the basis for fees and performance figures

**Source quote.**

> Given the conflicting responsibilities, managers have an incentive and the ability to inappropriately over-value their portfolios.27

**From.** Kaal, *Hedge Fund Valuation Retailization, Regulation, and Investor Suitability* (2009), II.C Conflict of Interest of the Manager, page 9

**Cite as.** Kaal, Hedge Fund Valuation Retailization, Regulation, and Investor Suitability (2009). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1428387

**Verify.** sha256 of source PDF `6aa3a280dc6750723be2389f3af2aabf3a16c4ce20e49fcdaddd7f2ea95a67aa` at https://raw.githubusercontent.com/wulfkaal/Academic-Papers/main/papers/pdf/Kaal%20-%202009%20-%20Hedge%20Fund%20Valuation%20Retailization%2C%20Regulation%2C%20and%20Investor%20Suitability.pdf

**Failure mode.** manager-self-valuation  (family: valuation-and-pricing-failure)

**Topics.** risk-and-incentives, economics

**Keywords.** net-asset-value, conflict-of-interest, manager-incentives, over-valuation

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