A gate is a contractual cap on LP redemptions in a given period—common in hedge funds and some evergreen or secondary vehicles, less typical in classic ten-year VC partnerships.

How it works

When a fund offers periodic liquidity, documents may state that redemptions above a threshold—often a percentage of net asset value per quarter—are deferred or pro-rated. If redemption requests exceed the gate, LPs join a queue paid as cash becomes available. GPs may also suspend redemptions entirely during market stress to avoid selling assets at distressed prices. Traditional closed-end VC funds usually do not offer voluntary redemption; liquidity arrives via distributions from exits. Gates matter most in evergreen VC, fund-of-funds with periodic liquidity, and secondary funds where LPs treat holdings as semi-liquid.

Why it matters

• LPs: Model liquidity needs against gate provisions. A “quarterly redeemable” label may still mean partial payouts under stress.
• GPs: Gates stabilize the portfolio during redemption spikes but damage trust if used unexpectedly—clear communication is essential.

Common mistake

Assuming all private fund interests are redeemable on demand. Most venture LP interests are illiquid for the fund’s life unless a secondary sale is arranged.

Related ideas

Redemption queue, suspension of redemptions, evergreen fund structures, and secondary market sales.