SIE practice questionmediumHedge Funds — Lock-Up Periods
A hedge fund lock-up period refers to:
- AThe SEC-mandated holding period for hedge fund registration
- BThe time during which the fund manager is prohibited from trading
- CThe time between when an investor applies and when they are accepted into the fund
- DA period during which investors cannot withdraw their capital from the fund✓ Correct answer
Explanation
Why D — A period during which investors cannot withdraw their capital from the fund
The lock-up period is a specified timeframe (often 1-3 years) during which hedge fund investors cannot redeem or withdraw their investment. This allows the manager to implement long-term strategies without worrying about short-term redemption pressure. Even after the lock-up expires, redemptions may be limited to certain windows (quarterly, annually) with advance notice requirements.
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