Side Pocket

AAA

DEFINITION of 'Side Pocket'

A type of account used in hedge funds to separate illiquid assets from other more liquid investments. Once an investment enters a side pocket account, only the present participants in the hedge fund will be entitled to a share of it. Future investors will not receive a share of the proceeds in the event the asset's returns get realized.

INVESTOPEDIA EXPLAINS 'Side Pocket'

Investors who leave the hedge fund will still receive a share of the side pocket's value when it gets realized. Usually only the most illiquid assets, such as delisted shares of a company, receive this type of treatment, because holding illiquid assets in a standard hedge fund portfolio can cause a great deal of complexity when investors liquidate their position. Overall, side pocket accounts resemble single asset private equity funds in structure.

RELATED TERMS
  1. Liquidate

    1. To convert assets into cash or equivalents by selling them ...
  2. Equity Fund

    A mutual fund that invests principally in stocks. It can be actively ...
  3. Hedge Fund

    An aggressively managed portfolio of investments that uses advanced ...
  4. Illiquid

    The state of a security or other asset that cannot easily be ...
  5. Delisting

    The removal of a listed security from the exchange on which it ...
  6. Long-Term Capital Management - ...

    A large hedge fund led by Nobel Prize-winning economists and ...
Related Articles
  1. A Brief History Of The Hedge Fund
    Options & Futures

    A Brief History Of The Hedge Fund

  2. Hedge Funds: Higher Returns Or Just ...
    Options & Futures

    Hedge Funds: Higher Returns Or Just ...

  3. Hedge Funds Hunt For Upside, Regardless ...
    Options & Futures

    Hedge Funds Hunt For Upside, Regardless ...

  4. What's the difference between a mutual ...
    Options & Futures

    What's the difference between a mutual ...

comments powered by Disqus
Hot Definitions
  1. Correlation

    In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used ...
  2. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  3. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  4. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  5. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  6. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
Trading Center