Faced with a rush of people who want to withdraw their investments, the Covington Fund II been forced to suspend redemptions.
In late 2011, the Covington II fund acquired the assets of the New Generation Biotech Fund and the five retail VenGrowth Investment Funds and imposed a 15% limit on the number of shares these investors may liquidate each year. When this limit was removed on Sept. 2 of this year, the fund says it received "significant and increasing requests" from people who wanted to withdraw their money and was forced to halt redemptions; as a result only those requests processed prior to the close of business on Sept. 4, 2015 are being honoured.
In a press release issued on Sept. 8, the Covington II board said it was acting in the best interest of shareholders since the influx of redemptions "has the potential to eliminate the liquidity required to operate the fund in an efficient manner". The fund expects to begin allowing investors to cash in shares again sometime before Dec. 31, 2015, at which time it will honour redemptions “of up to 20%” of net asset values as defined in its prospectus.
Covington II points out that it has honoured approximately $155 million in redemptions since the VenGrowth transaction was completed on Sept. 2, 2011, and that 44% of the outstanding units of the fund have been redeemed since that time. The fund also notes that redemptions will be honoured in the order in which they are received.
