The challenge for a hedge fund manager advising both a managed account and commingled fund with the same or overlapping investment strategies is that the liquidity and transparency terms retained by the managed account owner may adversely affect investors in the commingled fund. This three-part series examines why the management of both a commingled fund and a managed account with the same – or similar – investment strategy presents conflicts of interest for a fund manager. This second article analyzes how the enhanced transparency and liquidity rights typically retained by separately managed account clients, when compared to investors in the commingled fund, give rise to conflicts of interest for an investment manager and suggests several best practices for mitigating those conflicts of interest. The first article explored the increased use of separately managed accounts by institutional investors; ways separately managed accounts differ from single investor funds; and the general conflicts of interest that can arise for an investment manager when managing multiple client accounts. The third article will review the risks that can arise when investment managers make allocation decisions between a commingled fund and managed account client, and suggest several best practices for managing those conflicts. For more on managing conflicts of interest, see our three-part series on the simultaneous management of hedge funds and alternative mutual funds following the same strategy: “Investment Allocation Conflicts” (Apr. 2, 2015); “Operational Conflicts” (Apr. 9, 2015); and “How to Mitigate Conflicts” (Apr. 16, 2015).