What is a redemption gate?

Gates are written into the fund’s documents and are most common in hedge funds and open-ended private funds. A gate can apply at the fund level or to each investor, and managers may have discretion over whether to use it. Unmet requests may roll into later periods, sometimes with no priority over new ones, or may have to be filed again.

Say a fund holds $1 billion with a 10% quarterly gate and investors ask for $300 million. It pays $100 million this quarter, and the rest waits.

It stops a rush of withdrawals from forcing a fund to sell assets cheaply, and it means an investor may wait longer than expected for cash.