Lock-Up Period
Window of time in which investors of a hedge fund or other closely-held investment vehicle are not allowed to redeem or sell shares. The lock-up period helps portfolio managers avoid liquidity problems while capital is put to work in sometimes illiquid investments. Investopedia Says:
The IPO lock-up is a common lock-up period in the equities market used for newly-issued public shares. IPO lock-ups typically last anywhere from 90 to 180 days after the first day of trading, and are in place to prevent shareholders with a large proportion of ownership (such as company executives) from flooding the market with shares during the initial trading period.
It is not uncommon to see a lock-up period of two years or more for a hedge fund; the underlying investments of a hedge fund may be so illiquid that fund managers could take big hits by forcibly selling securities to meet the cash requirements of exiting investors. The lock-up period protects the majority of assets in the fund and allows portfolio managers to keep a lower amount of cash on hand. Related Terms:
Blackout Period
Hedge Fund
Initial Public Offering - IPO
IPO Lock-Up
Liquidity |