Additionally, the lock-up period is different for each investment, reducing the chances of an extensive liquidation at one time. This will result in lower investments and even lower returns.
One of the reasons for having the share moratorium guideline in Malaysia is to avoid. When there is no lock-up period or a redemption schedule, the manager of the fund will need a lot of cash available. disposing of their shares for a specified period following a listing. Usually, there is a notice given 30-90 days prior so the fund manager can liquidate them, allowing the payment to investors. What is a Lock-Up Period A lock-up period is a window of time when investors are not allowed to reclaim or sell shares of a specific investment. When this time period ends, the holder of the securities will be permitted to redeem them on a set schedule.
The purpose of the lock-up period is to prevent the stock price from falling due to a high supply and helps the company maintain the share price. A lockup period typically applies to insiders like managers, employees, owners, founders, etc. In the case of an IPO, the lock-up period helps keep the issuer’s business model intact, allowing them to continue growing by retaining more cash. The lock-up period for hedge funds is generally 30-90 days, which provides the investor time to exit from the investment without having a significant impact on their portfolio due to price changes. For hedge funds, this time period is given so that the investor can exit from illiquid or unbalanced investments in their portfolio.
For a lock-up period, the two main uses are for startups/IPOs and hedge funds. A lock-up period is a certain time period in which you are not permitted to sell or redeem your shares. For hedge funds, the lock up period gives the hedge fund manager time to exit investments that may be illiquid or otherwise unbalance their portfolio of.
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