For hedge fund investors, which "standard" liquidity provisions are the worst for liquidity?

The answer is often a 20% gate, since it can take 800+ days to get all of your money back, as you'll see in the example below. Read on. There is also an additional hidden surprise that gets uncovered in the LiquidityCalendar.com reports. Combine that gate with a common holdback, and liquidity gets worse depending on the month in which you redeem. Explaining this to a client or the board is not easy, especially when they're already upset about how long it takes to get all of their money back.    

The example of the 800+ day surprise

It's not something you can easily map in Excel, so I created a visual on a sample calendar seen below. It models the 20% gate, quarterly redemptions and a 10% holdback payable after the audit is due. A larger image is visible by clicking on the calendar.

Investor are surprised when they find that the same liquidity provision takes 806 days to get all of their money back, but 305 “fewer” days if the redemption request is made during a different time of year?

If you submitted notice on January 15, 2016 to trigger the start of a full redemption request in that quarter, you would get your final payment a whopping 806 days later on March 31, 2018. Are you surprised? See the blue ovals on the calendar to track this.  However, if you submitted notice on November 15, 2016, to trigger the start of a full redemption request in that quarter, you would still get your final payment on the same date, that of March 31, 2018, but it is 305 fewer days from your request. Yes, almost a year shorter! Take a look at the calendar to see the green colored payment schedules, and when the final payment would be made.

If you submitted notice on January 15, 2016 to trigger the start of a full redemption request in that quarter, you would get your final payment a whopping 806 days later on March 31, 2018. Are you surprised? See the blue ovals on the calendar to track this.

However, if you submitted notice on November 15, 2016, to trigger the start of a full redemption request in that quarter, you would still get your final payment on the same date, that of March 31, 2018, but it is 305 fewer days from your request. Yes, almost a year shorter! Take a look at the calendar to see the green colored payment schedules, and when the final payment would be made.

LiquidityCalendar.com allows family offices and wealth managers to show clients their true liquidity, without any surprises.

 These insights and more are in the Liquidity Calendar app. Contact us today if you'd like to have your gates, lockups, holdbacks and withdraw schedules translated to uncover your true liquidity.

An indispensable report to prevent your client from being surprised about liquidity provisions

Family offices and wealth managers educate their clients on the risks and rewards of investing in hedge funds. Often overlooked in that education is the real meaning behind the hedge funds' liquidity provisions. Sharing a common provision like the one seen below doesn't mean the investor understands the effect it can have.

SAMPLE LIQUIDITY PROVISION

For a lower fee schedule the investor can select a 3 year soft lockup with one year rolling soft lockups. During lock-up periods, redemptions can be made quarterly with a 20% gate on 45 calendar days written notice. Otherwise, 100% redemptions are permitted on your anniversary at quarter-end, and each anniversary thereafter, with 20 business days written notice. A 10% holdback is applied until audit is done.

We've translated for you the myriad of liquidity provisions into dates and schedules in LiquidityCalendar.com

Not knowing the real outcome of a provision like the one above can be embarrassing in front of a client, and a sore point in relations when the investor is advised on the negative outcome.

Our customers at LiquidityCalendar.com have many one-of-a-kind reports at their fingertips. Reports that can tell them how much can be liquidated and when, all in one click. Alerts even remind them when deadlines are approaching.

One of those reports translates the legal provisions for withdrawals into dates and schedules. A handy report for anyone who needs to know the true effect of liquidity provisions - and educate their client on it. The report has been in such high demand that we've decided to give it away here.