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Open Categories Menu What is a “gate” provision?
- 1 August, 2008 -
- Hedge Fund Questions and Answers, Hedge Fund Structure -
- Tags : gate provision, hedge fund offering documents
- 3 Comments
A “gate” provision is a hedge fund manager’s right to limit the amount of withdrawals on any withdrawal date to not more than a stated percentage of a fund’s net assets — often 10% to 25%, depending on how frequently investors have a right to withdraw capital. Gates are a very common feature in hedge funds of almost all strategies. Imposing a gate slows a potential “run on the fund” by forcing investors to wait until the next regular withdrawal date to receive the unfulfilled balance of their withdrawal requests. Gates are especially important for hedge fund strategies which are more illiquid like MBS strategies.
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[...] which are usually built into the hedge fund offering documents. These provisions include the hedge fund gate provision and a general catch-all provision. In general, the gate allows redemption requests to be reduced [...]