The risk of loss that is caused the exit of investors from a mutual fund or investment pool. This risk translates as a reduction in management fees (for fund managers), as well as the existing shareholders who would lose value if the manager is forced to sell illiquid assets (at lower prices) to pay back any shares that have been part of the redemption process.
This risk is common with open-end funds as these funds involve share sales and purchases between other shareholders on an exchange, while closed-end funds are not subject to redemption risk as units are bought from, and sold to, the fund.
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