Rolling Lock-up Clause
(Hedge Fund)

Summary

This rolling lock-up clause for hedge fund (HF) limited partnership agreements is one of several terms a HF may employ to limit investors' ability to voluntarily withdrawal capital from the HF. Specifically, it provides that a capital contribution cannot be withdrawn for a specified period (a "lock-up period"), typically one year or longer, and will be subject to one or more subsequent lock-up periods if the investor does not request withdrawal. This clause includes practical guidance and drafting notes. This rolling lock-up clause is drafted assuming that the HF is a domestic limited partnership. Note that the legal form and jurisdiction of a HF can vary, and accordingly, the terms related to HF withdrawals can also take on several formulations. For example, if a HF is a corporation or company, rather than a partnership, the return of capital is structured as a redemption of shares or units, rather than a withdrawal of capital. This clause should be read in conjunction with the practice notes Hedge Funds Structure and Organization and Hedge Fund and Its Offering: Drafting and Reviewing the Key Documentation. This clause assumes that it will be included in a HF limited partnership agreement. For a full listing of related first year associate investment management content, see First Year Associate Resource Kit: Investment Management.