When investors wish to sell units in mutual funds, there is a risk of the...

Fund Gating:

Gating occurs when fund managers temporarily restrict redemptions to protect the remaining investors and ensure liquidity.

This allows the fund to sell illiquid assets to generate sufficient cash for redemptions.

Elimination of Other Options:

A: Tax deferral benefits are irrelevant to gating.

B: Commission proportions are unrelated to liquidity.

C: Lock-in periods are predetermined and not linked to gating.

References:

ICWIM Module 3: Focus on fund structures and liquidity management.