The Review of Securities & Commodities Regulation, Vol. 41 No. 13
“Side Pockets On The Rise – Issues, Analysis, And Impact”
Illiquid or hard-to-value investments segregated in “side pockets” of hedge funds generally are not included in net asset value for purposes of performance fees or for processing subscriptions or redemptions. Their use protects long-term investors from forced sales of such investments to fund redemptions, but also raises issues of valuation, disclosure, and reduced liquidity.