Gates
A gate is a contractual limit on the amount investors can redeem during a given period, used to manage liquidity stress.
Definition
Gates restrict the volume of redemptions a fund will process in a redemption window, typically expressed as a percentage of fund assets or investor capital. Gates are designed to prevent forced selling of assets and to protect remaining investors during periods of heavy redemption demand. Allocator Context Gates are most common in hedge funds and semi-liquid vehicles. Allocators assess gate provisions as part of liquidity planning and evaluate whether the underlying assets justify the restriction. Gates can be reasonable when they match asset liquidity; they are problematic when used to mask liquidity mismatch. Decision Authority Gate terms often require heightened governance review because they reduce investor control during stress. Institutions frequently have policy guidance about acceptable gating terms and may require committee approval for strategies with tight restrictions. Why It Matters for Fundraising Managers should explain gating triggers, mechanics, and historical usage. Allocators want to know whether gates are a genuine liquidity management tool or a sign that the strategy may become trapped during stress. Key Takeaways Gates limit redemptions under stress Must match underlying asset liquidity Reviewed heavily in governance processes Clear mechanics reduce surprise and distrust