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.

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