Lock-Up
Last updated 17 July 2026
A lock-up is a period during which an investor cannot redeem or withdraw capital from an investment vehicle. Hedge funds may impose an initial lock-up after subscription and then allow withdrawals at stated dealing dates with notice. Private equity funds are structurally long-term, with capital returned as investments are realised rather than through investor-requested redemption.
Terms vary. A lock-up may be hard, meaning no withdrawal is permitted, or soft, meaning early withdrawal is possible subject to a fee. Funds can also have notice periods, gates that limit total redemptions, side pockets for hard-to-sell assets, or manager powers to suspend dealing under defined conditions.
Why it matters for family offices
Lock-ups allow managers to hold assets without having to sell them to meet immediate withdrawals. The corresponding liquidity risk sits with investors. A fund statement may show a current value, but that does not establish when the family can receive cash or whether the full amount could be redeemed at once.
The office maps restrictions across every vehicle, including any different terms in side letters. It combines those dates with capital calls, taxes, distributions, and spending forecasts. Diversification by manager does not solve a liquidity problem if many funds have similar redemption windows or can impose gates during the same stressed market.
How it shows up in practice
Suppose a family invests $4 million in a hedge fund with a one-year initial lock-up, quarterly dealing thereafter, and 90 days' notice. Eight months later, it expects a large property purchase. The latest statement shows $4.3 million, but the fund cannot supply cash by the intended closing date under the standard terms.
The family office confirms whether any side-letter right changes the restriction, then excludes the position from near-term liquidity. It uses other assets for the purchase or changes the timing. Reporting shows the next eligible redemption date and notice deadline beside the value. That simple context prevents an illiquid fund interest from being mistaken for cash merely because it receives regular valuations.
Related terms
Hedge Fund
A privately offered investment fund that pursues flexible strategies, including short selling, leverage, and derivatives, aiming for returns that do not simply track markets. Hedge funds sit within the alternatives allocation of many family portfolios, valued for diversification and downside management. They charge management and performance fees and typically restrict withdrawals through lock-ups and notice periods.
Liquidity
The ease with which an asset can be converted into cash without significant loss of value. Listed equities and bonds are liquid; private equity, real estate, and collectibles are illiquid. Family offices manage liquidity carefully to fund capital calls, distributions to family members, taxes, and lifestyle spending without forced selling.
Illiquid Assets
Assets that cannot be quickly sold at fair value, including private equity stakes, real estate, direct holdings in companies, and collectibles. Illiquid assets often make up the majority of UHNW wealth and carry return premiums precisely because capital is locked up. They also lack daily pricing and standard statements, which is why tracking them accurately is a defining challenge of family office reporting.
Private Equity
Investment in companies that are not publicly traded, typically through funds that acquire, improve, and eventually sell businesses. Private equity offers strong long-term return potential in exchange for illiquidity and long holding periods. For family offices, tracking commitments, capital calls, distributions, and valuations across many funds is a significant administrative undertaking.
Side Letter
A private agreement between a fund and an individual investor granting terms beyond the standard fund documents, such as fee discounts, co-investment rights, enhanced reporting, or transfer permissions. Large or early investors, including family offices, routinely negotiate side letters. Tracking the specific rights held in each fund is part of disciplined private markets administration.
Further reading
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