A lock-up period in semi-liquid investment funds refers to a timeframe during which investors cannot redeem or sell their shares. This ensures the fund has stable capital to invest in less liquid assets. There are two types of lock-ups: hard lock-ups and soft lock-ups.
A hard lock-up is a period during which investors are completely restricted from selling their shares, without exception. This allows fund managers time to invest in illiquid assets without worrying about early redemptions. A hard lock-up can range from 6 months to several years, depending on the fund in question.
A soft lock-up is a period during which investors can sell their shares but must pay a penalty or fee for early withdrawal. This discourages early redemptions while still allowing some flexibility for investors who need liquidity. Similar to hard lock-ups, they can often last several months to a few years.