A fund's sub-adviser can open new distribution channels, provide investment expertise, lend name recognition and, in some cases, create a conflict of interest, according to industry lawyers and observers.

Conflicts can sometimes arise when multi-managed funds hire an affiliated sub-adviser, said Geoff Bobroff, president of Bobroff Consulting of East Greenwich, R.I. Whether an affiliated sub-adviser has an advantage or is favored over an independent sub-adviser in the selection process is the crux of the issue, he said.

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