Redemption Suspension


DEFINITION of 'Redemption Suspension'

A provision on a hedge fund preventing the withdrawal from the fund during a redemption period. Depending on the terms of the hedge fund, which can be found in its prospectus, a manager generally has the ability to implement this at anytime. The redemption suspension is implemented when the fund is unable to meet redemption demands.

BREAKING DOWN 'Redemption Suspension'

This action is seen as a very negative event for a hedge fund and is used only in extreme situations, as it is preventing investors to access their money. It is also seen as a sign of a major problem within the fund and its management, and will often lead to a run on the fund once the redemption suspension is lifted.

  1. Hedge Fund

    An aggressively managed portfolio of investments that uses leveraged, ...
  2. Aggressive Investment Strategy

    A portfolio management strategy that attempts to maximize returns ...
  3. Redemption

    The return of an investor's principal in a fixed income security, ...
  4. Redemption Fee

    A fee collected by an investment company from traders practicing ...
  5. Liquidity Risk

    The risk stemming from the lack of marketability of an investment ...
  6. Gate Provision

    A restriction placed on a hedge fund limiting the amount of withdrawals ...
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