The alignment of interests between investors and fund managers primarily builds what?

The alignment of interests between investors and fund managers primarily fosters trust and cooperation. When investors believe that fund managers are motivated to perform well because their financial interests are tied together, it creates a collaborative environment. This trust is crucial for the long-term relationship between investors and managers, encouraging transparent communication and a shared objective to maximize returns.

Fund managers who have a stake in the fund will likely make decisions that benefit both themselves and their investors, leading to a more cohesive partnership. This alignment is fundamental in private capital advisory, where the stakes are high and the investment strategies require both parties to work toward common goals.

The other options pertain to various aspects of investment but do not capture the essence of the relationship formed through aligned interests as effectively as trust and cooperation do. While financial risks can arise from misalignment, they are not a direct result of aligned interests. Market competition and investment diversification may influence investment strategies, but they do not specifically stem from the dynamics of trust and cooperation between investors and fund managers.