What must an asset manager consider regarding conflicts of interest?

An asset manager must consider that a conflict of interest must be weighed in evaluations because it directly influences decision-making and can impact the fairness and integrity of the asset management process. Conflicts of interest can arise when personal interests or relationships could improperly influence professional judgments or actions. In evaluations, understanding these conflicts is essential for maintaining transparency and ensuring that all decisions made are in the best interest of the stakeholders involved.

Evaluating conflicts allows an asset manager to identify potential biases and develop strategies to mitigate these issues. This approach fosters trust with clients and stakeholders, ensuring that management decisions are ethical and grounded in their fiduciary duty to act in the best interest of the asset owners. Addressing conflicts properly contributes to sound management practices and enhances the overall reputation of the asset management firm.

The other options do not accurately capture the role of conflict management in asset management. For instance, stating that a conflict makes contracting impossible overlooks the nuanced approaches that managers can employ to address and manage conflicts rather than disregarding them. Moreover, the assertion that conflicts negate the need for cost audits dismisses the importance of financial oversight despite any conflicts that may be present. Lastly, proclaiming that competition will not gain insider information does not reflect the reality that competitors can still access information in ways that may