Redemption

Withdrawing money from a fund by selling units back to the vehicle itself, rather than to another investor.

Example

A fund offering quarterly redemption with 90 days' notice can leave money up to six months away from being available.

Important

A redemption right is only as good as the vehicle can honour. Where the underlying assets take longer to sell than the terms allow, the right works in calm conditions and suspends in stressed ones.

Related terms

• Gate provision — A clause allowing a fund to limit or suspend withdrawals when too many investors ask to leave at once.
• Lock-up period — A contractual period during which you cannot withdraw money from a fund or sell a holding, however much you might want to.
• Liquidity — How quickly and cheaply an asset can be converted to cash without moving its own price.

Lessons that explain it

• Lock-ups: what you actually give up when you cannot sell — A lock-up is a promise you make about your own future, and you make it without knowing what your future will need. Here is what is on the other side of that promise. (10 min)

All 578 terms in the Investing glossary