Redemption Queue

Definition

Definition A redemption queue forms when investors request withdrawals but the fund cannot meet all redemptions immediately due to gates, limited liquidity, asset settlement timing, or stressed market conditions. Requests are often processed pro rata or in sequence depending on fund terms. Redemption queues highlight liquidity mismatch and can change investor behavior and reputation dynamics. Allocator Context Allocators treat redemption queues as a governance and liquidity stress signal. Even if underlying assets are sound, a queue can create uncertainty, complicate internal cash planning, and increase scrutiny of liquidity management, gating policy, and valuation integrity. Decision Authority Institutions may escalate liquidity issues to committees, especially if the strategy was expected to be a liquid diversifier. Redemption queue exposure can influence whether the allocator continues allocating to similar vehicles. Why It Matters for Fundraising Liquidity events become part of a manager’s reputation. Managers with clear liquidity frameworks and transparent communication manage damage; managers that appear surprised or opaque lose trust and future demand. Key Takeaways Indicates liquidity constraints relative to redemption demand Drives governance scrutiny and reputational risk Impacts allocator cash planning Transparency is decisive in damage control