Kensington PE Fund Extends Redemption Suspension Through March 2026 Amid Valuation Risks

The recent announcement by Kensington Capital marks a continuation and escalation of liquidity stress in the private equity sector in Canada. By extending a suspension of redemptions—originally enacted on September 30, 2025—for an additional period of up to 90 days, the fund is signalling that exit markets remain constrained. These constraints stem from low IPO and M&A activity, leading to difficulty in valuing portfolio holdings and risk of forced sales at depressed prices.

From an investment banking perspective, this move has multiple immediate and strategic implications. First, funds with open-ended redemption features in private equity must increasingly plan for extended illiquidity periods. It underscores the importance of flexible fund structures and clear redemption policies for LPs. Second, valuation risk intensifies when redemption demands are frozen; investors holding units may lack transparency into when or at what values their shares will be repurchased, potentially increasing risk premiums or discount rates applied to such assets.

Also, the fee reduction—albeit modest at 10 basis points—suggests that Kensington recognizes the reputational and financial risk of freezing redemptions. However, fee cuts are limited in offsetting investor concerns if the fund remains locked for longer. For investors, the extension of the suspension raises questions about opportunity cost, relative liquidity among peers, and how this fund tracks benchmarks in private equity or secondary markets.

Key strategic open questions include: How large is the fund, and what portion of its assets are in near-term exit possibilities? How severe is existing redemption demand, and might the fund need to sell assets under duress? Additionally, how sufficient are governing terms in providing managers with flexibility to respond to protracted liquidity droughts? How will performance and investor confidence be affected over time, particularly if similar actions become common across the sector?