Banks vs. Funds: A Simple Guide for People New to Funds
Advance notice, KYC/AML, and the unglamorous reality of compliance.
If you’re new to private funds, the first shock often comes when you try to redeem: you’re told you need to give advance notice, sometimes 60, 90 or even 180 days, and that the cash won’t hit your bank until after month‑end when the NAV is finalized. For people used to walking into a neighborhood bank and withdrawing money on the spot, this feels strange.
Banks vs. Funds
At a bank, your withdrawal doesn’t require valuing a portfolio. At a fund, your withdrawal does. Administrators need time to
lock the request to the correct “dealing day,”
verify identity and banking instructions,
coordinate any asset sales or rebalancing, and
calculate NAV so you’re paid the right amount.
Why Advance Notice Exists
1) Portfolio liquidity.
Funds often hold securities that aren’t instantly liquid or that trade with market impact. Advance notice lets the manager raise cash responsibly instead of fire‑selling.
2) Operational sequencing.
Fund Admin collects all requests up to the cutoff date.
Closes the window and values the portfolio.
Calculates the per‑share price (NAV).
Send wires based on that price.
3) Compliance
Before money moves, the admin must re‑check KYC (Know Your Customer) and AML (Anti‑Money Laundering) requirements—sometimes again at redemption. If anything has changed (address, name, bank details, beneficial owners, corporate control), more documentation may be required.
“My Bank Doesn’t Ask for All This—Why Do You?”
Regular people often find this shocking because retail banking is designed for instant access and relatively simple monitoring at the account level. Fund administrators, by contrast, operate under stricter KYC/AML frameworks— enhanced due diligence, sanctions screening, politically exposed person (PEP) checks, source‑of‑funds/source‑of‑wealth reviews, and verification of beneficiary bank accounts. The thresholds for “what’s acceptable” are higher, and the penalties for getting it wrong are real.
Admins can face fines and regulatory consequences if they miss a step.
Failed AML/KYC controls can result in monetary penalties, regulatory sanctions, and personal job risk for the professionals overseeing your account. These fines happen all the time.
So when an admin asks for updated passports, corporate resolutions, wiring proofs, or a fresh bank letter, it isn’t to make your life hard. It’s to ensure the redemption passes every control that regulators expect.
Practical Tips to Make Withdrawals Smooth
Know your notice dates. Put them on your calendar. Missing cut‑off by one day often pushes you to the next window.
Keep KYC fresh. If you’ve changed your name, address, entity control, or bank, update the admin before you redeem.
Match names exactly. Beneficiary bank details must match the registered investor name.
Avoid last‑minute bank changes. New beneficiary accounts typically trigger enhanced verification.
Read the docs. Your PPM/Subscription Agreement spells out notice periods and settlement timelines.
The Human Side of Fund Admins
At the end of the day, the fund administrator isn’t trying to slow you down. They’re following the rules that protect the fund and all investors. They’re following the regulations that keep them from getting fined or losing their job. If you plan ahead, keep your information current, and respect the calendar, redemptions can be boring and predictable which is the highest compliment in compliance.