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Lock-Up Period

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Dictionary Says

Definition of 'Lock-Up Period'

Window of time in which investors of a hedge fund or other closely-held investment vehicle are not allowed to redeem or sell shares. The lock-up period helps portfolio managers avoid liquidity problems while capital is put to work in sometimes illiquid investments.
Investopedia Says

Investopedia explains 'Lock-Up Period'

The IPO lock-up is a common lock-up period in the equities market used for newly-issued public shares. IPO lock-ups typically last anywhere from 90 to 180 days after the first day of trading, and are in place to prevent shareholders with a large proportion of ownership (such as company executives) from flooding the market with shares during the initial trading period.

It is not uncommon to see a lock-up period of two years or more for a hedge fund; the underlying investments of a hedge fund may be so illiquid that fund managers could take big hits by forcibly selling securities to meet the cash requirements of exiting investors. The lock-up period protects the majority of assets in the fund and allows portfolio managers to keep a lower amount of cash on hand.

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