# kaal:claim:1428387-011

**Claim.** Outsourcing valuation to an independent administrator can be nominal rather than real: the administrator may lack the understanding of complex securities products needed to value the positions, so the manager remains in charge of valuation even though the function has formally been externalized.

**Type.** failure  **Support.** argued

**Holds when.**

- where positions involve complex securities products
- where the administrator is paid by the hedge fund manager

**Source quote.**

> The administrator may not have the understanding of complex securities products required to appropriately value the positions, and the manager may remain the person in charge of valuation even though formally that position has

**From.** Kaal, *Hedge Fund Valuation Retailization, Regulation, and Investor Suitability* (2009), II.C Conflict of Interest of the Manager, page 10

**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.** nominal-independence  (family: valuation-and-pricing-failure)

**Topics.** economics

**Keywords.** independent-administrator, outsourcing, valuation-competence, formal-vs-real-independence

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