3.33.1.5 Side Pocket Creation

This topic provides information on side pocket creation.

Side pockets are special type of accounts used in hedge funds to separate illiquid assets from other more liquid investments. Once an investment enters a side pocket account, only the present participants in the hedge fund will be entitled to a share of it. Future investors will not receive a share of the proceeds in the event the asset's returns get realized.

During side pocket creation, percentage-wise redemption transactions are generated for all unit holders, based on the split percentage specified in the corporate action. Unit-wise subscription transactions, equal to units redeemed from the main fund, are generated for side pocket fund.