What is the suspension of the redemption
Suspension of repayment is the provision of a hedge Fund, which prevents the exit from the Fund within a certain period, or when the Fund is unable to meet the ransom demand. Fund managers can implement a suspension at anytime, depending on the terms of a hedge Fund, which should be set forth in the prospectus.
Penetration of the suspension of redemption
The suspension of foreclosure is a negative event for a hedge Fund and, as a rule, only in extreme situations. Managers of hedge Fund and Board of Trustees will have to seek other options before committing to the suspension, and all must agree that suspending repayment is the best course of action for investors, and the Fund as a whole. This event reflects poorly on the management team of the Fund and its operation.
This kind of suspension, as a rule, has a negative impact on investor sentiment in the hedge Fund and the loss of trust. Once raised, it is common to see a surge of redemption requests, as investors will lose confidence in the Fund.
Usually, the repayment includes repayment of principal and may be at nominal value or at cost depending on the terms and conditions stipulated by individual Fund. Terms and conditions may vary from Fund to Fund. The Fund shall inform the Supervisory authorities and investors of the suspension and to keep participants informed of developments throughout the period, the suspension lasts. According to the rule, the Fund must do everything possible to lift the suspension as soon as possible.
Redemption Event Suspension
The suspension of redemption are rare. As a rule, they are reserved for emergencies that affect the economy as a whole and questioned how the events can endanger the health of the financial markets in General. For example, the global financial crisis has had a significant impact on hedge funds. Market uncertainty has caused many investors to redeem their holdings in a flight to safety. The depth of the financial crisis forced many hedge funds to either suspend or limit redemptions.
Other events that can cause a hedge Fund to determine that the suspension of repayment appropriate include natural disasters that lead to financial markets on the cessation of trading activities. Fund managers and of the Board of Trustees may also provide for the termination on the background of the merger Fund, which can be complex and lead to an increase in demands for redemption. Departures of key personnel who receives negative attention from investors also may be the reason for the suspension, especially if particularly influential Trustees to step back from the Fund decision-making.