when the lock up period ends investors may redeem their shares according to a set schedule often quarterly they normally must give a 30 to 90 day notice so that the fund manager may liquidate underlying securities that allow for payment to the investors 
during the lock up period a hedge fund manager may invest in securities according to the fund s goals without concern for share redemption the manager has time for building strong positions in various assets and maximizing potential gains while keeping less cash on hand in the absence of a lock up period and scheduled redemption schedule a hedge fund manager would need a great amount of cash or cash equivalents available at all times less money would be invested and returns may be lower also because each investor s lock up period varies by his personal investment date massive liquidation cannot take place for any given fund at one time lock up periods can also be used to retain key employees where stock awards are not redeemable for a certain period to keep an employee from moving to a competitor maintain continuity or until they have completed a key mission example of a lock up periodas an example a fictitious hedge fund epsilon co invests in distressed south american debt the interest returns are high but the market liquidity is low if one of epsilon s customers sought to sell a large portion of its portfolio in epsilon at one time it would likely send prices far lower than if epsilon sold portions of its holdings over a longer period of time but since epsilon has a 90 day lock up period it gives them time to sell more gradually allowing the market to absorb the sales more evenly and keep prices more stable resulting in a better outcome for the investor and epsilon than may otherwise have been the case special considerationsthe lock up period for newly issued public shares of a company helps stabilize the stock price after it enters the market when the stock s price and demand are up the company brings in more money if business insiders sold their shares to the public it would appear the business is not worth investing in and stock prices and demand would go down 