Investors periodically submit requests to redeem from a fund and thereafter, for any number of reasons, change their minds. Requests to rescind a redemption notice may be welcomed by the hedge fund manager, but decisions regarding rescission requests should not be made in a vacuum. Rather, various factors must be taken into consideration, including whether permitting that investor to remain invested in the fund is in the best interest of the fund as a whole and all its underlying investors. In anticipation of year-end redemptions, this two-part series explores how fund managers should evaluate rescission requests. This second article discusses three factors that fund managers should consider when evaluating rescission requests, as well as how fund managers should document their decision-making processes. The first article
analyzed the provisions in a fund’s governing documents that are relevant to those requests, investors’ motivations underlying rescission requests and three additional considerations that fund managers should factor into their decision-making processes. For a discussion of rescission of redemption notices in another context, see “Can a Hedge Fund Retroactively Amend Its Partnership Agreement to ‘Rescind’ an Investor’s Redemption Request?
” (May 8, 2014).