Investment Funds Observations 2017 - Part Three

From our vantage point as advisers to many of the world's top hedge fund managers, broad market forces flow through to our instructions, and ultimately drive many of the terms of the funds we advise.

In this series we take a look at what we have been seeing in the investment funds world. Part three will focus on hedge funds.

Liquidity follows strategy, but managers can use it to their advantage

The most influential factor affecting a fund's liquidity terms is its strategy. Monthly and quarterly redemptions remain the most common liquidity structure in 2017 for traditional corporate fund structures.

One third of the funds surveyed employed lock-up periods, typically for 12 months and with a broadly even split between hard lock-ups (redemptions not permitted during the lock-up period) and soft lock-ups (redemptions permitted, but subject to an early redemption fee). We have also observed managers using lock-ups, either in 'founders' classes or in side letters,