Due Diligence FAQs
Can the fund restrict redemptions?
Yes. In the case of open-ended funds, lock-ups, gates and NAV suspensions can place restrictions on potential redemptions. Investors should refer to the offering documents to ensure there is specific provisions as to when and how such restrictions are imposed.
Where the fund trades liquid assets, it is questionable whether an investor should be comfortable with redemption restrictions, but best practice does recognize that market conditions may be such that some restrictions do apply. Funds in more regulated jurisdictions will need the avail of the regulator to enforce such restrictions, which may provide more comfort for investors.
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