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Redemption gate

A provision capping total withdrawals in any single period, commonly at 10% to 25% of fund assets, so redemptions are spread over time instead of forcing rapid liquidation.

A fund-level gate applies the cap across all investors pro rata; an investor-level gate limits what each holder can take out. Either way, requests above the cap roll into the next period.

Gates protect remaining holders from being left with the least saleable assets after early redeemers take the liquid ones. That protection is real, but it also means the investors who most want out are the ones most affected, and gating is often read as a distress signal that triggers further requests.

Gates were used widely in 2008 and again during the 2020 liquidity squeeze in property funds. Read the gate provisions, the notice period and the suspension powers together; they define the actual liquidity of the investment. See lock-up-period-portfolio and side-pocket.

Related: side-pocket, liquidity, interval-fund, open-end-fund, money-market-fund

See it drawn

Original diagrams for the ideas on this page. Illustrative, not real market data.

Bid-ask spread in an order bookSell orders stacked above buy orders with a gap between the best of each.SELLERS (asks)50.0690050.051,40050.0460050.011,10050.002,30049.99800spread = 0.03BUYERS (bids)
The bid-ask spread. Buy orders sit below, sell orders above, and the gap between the best bid (50.01) and best ask (50.04) is the spread you pay to cross. Bar length shows the size resting at each price.

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