Gate Provision

A gate provision refers to a statement in a fund’s offering documents that establishes the fund manager’s right to limit or halt redemptions. The prospectus or offering documents may provide more detail on a gate provision, such as scenarios where redemptions would be restricted or halted entirely. Gate provisions are intended to stop a run on a fund, particularly when the assets a fund holds are illiquid and difficult to turn to cash for redemption in a timely manner. Even with scenarios and guidelines, the decision to exercise the gate provision is the fund managers.