Average Hedge Fund Lockups Diminish

The number of hedge funds employing lockup periods during which investors must wait to reclaim assets shrunk in recent years, according to research from eVestment.

The investment intelligence firm also observed shortening average lengths among hedging products that do employ lockup periods—a fact credited to growing demand for liquidity in challenging and volatile markets. Both hedge funds and funds of hedge funds (FoHFs) are covered in the report.

Since 2007, the number of hedge funds employing no lockup period moved into the majority, climbing to about 51% from a base of about 46%, according to the eVestment report “Hedge Fund Lockups & Capital Cycles.” For FoHFs, the no-lockup group increased from about 54% to about 56%.

Other figures outlined in the report include a drop from 39.8% to 36.5% for hedge funds employing 12-month lockups. For FoHFs, the change was slightly less, falling to 35.4% from 36%.

Industry averages include 9.9 months of hard lockups and 13.29 months of total lockups for hedge funds. For FoHFs, the averages are 10.94 months of hard lockups and 13.31 months of total lockups. Including funds with no lockups would cut the total lockup average to 5.6 months across the industry, according to the report. 

Hedge Funds and FoHFs using lockups but coming in below the industry averages included the following:

– Fixed-income multi-strategy, with 8.5 months hard and 11.5 total lockup on average.

– Macro, with 6.87 months hard and 11.03 total.

– Managed futures funds, with 4.5 months hard and 9.5 total.

Hedge Funds and FoHFs coming in above the industry averages include hedging products taking on distressed, event driven/special situation and securitized credit strategies.

Also notable in the report are figures showing most hedge funds continue to use a monthly redemption cycle. Those with the highest lockups—namely distressed and securitized credit funds—tend to utilize quarterly cycles for allowing investor redemptions.

More on eVestment’s research can be accessed here.