Gate Provision

Gate Provision
A restriction placed on a hedge fund limiting the amount of withdrawals from the fund during a redemption period. The implementation of a gate on a hedge fund is up to the hedge fund manager. The purpose of the provision is to prevent a run on the fund, which could cripple its operations, as a large number of withdrawals from the fund would force the manager to sell off a large number of positions.

This is a very common provision on a hedge fund and the exact percent of restriction can be found in the hedge fund prospectus. This is a less severe withdrawal restriction than an all out redemption suspension, which doesn't allow for withdrawals at all. But a gate provision is still seen generally as a negative event.


Investment dictionary. . 2012.

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