Manage Side Pockets, Lock-ups and Gates
In response market conditions, several new issues have taken on prominence in the current market environment:
- Side pockets and special purpose vehicles are becoming common for funds seeking to segregate illiquid – or newly illiquid – positions.
- A recent market-driven wave of redemptions from funds are causing liquidity concerns on every manager’s mind. For many fund managers, there is the need, in advance of every redemption period, to estimate potential redemption requests from investors who are no longer under lock-up restrictions.
The complexity multiplies for funds of funds, which need to balance potential redemption requests against the liquidity of their investment in underlying hedge funds, which are themselves subject to lock-up periods (and potentially gates) restricting the liquidity of those investments.
InvesTier provides for the creation of unlimited numbers of side pockets, and moving investments and investors. It also manages the introduction of new, limited-time investor fee structures designed to retain current capital or draw additional investment – whether applied to the fund as a whole or discretely (e.g., to the main fund or to one or more side pockets).
InvesTier tracks the lock-up for each subscription, for each investor, and can calculate both potential unrestricted redemption requests and penalties to be charged to investors redeeming early. For funds of funds, InvesTier also tracks the lock-up for subscriptions in underlying fund investments, helping to match the liquidity of your investments with the liquidity require to satisfy potential redemption requests.
InvesTier also can process gates – creating adjusted, pro rata reductions in redemption requests to meet the gate cap – and any exceptions defined by the fund manager.