Investment Insights Liqudity: does less equal more?

In this month’s edition of Investment Insights, we explore the relevance of liquidity as an allocation driver for professional investors in their quest for enhanced returns.

12 Apr 2017

Can assets that are difficult to price or sell really justify a place in investors’ portfolios? In the quest for improved income and risk-adjusted returns, this question has been driving institutional investors’ fast-growing interest in a broad range of illiquid asset classes including infrastructure, private credit, real estate and private equity. But how should investors approach making an allocation to illiquid assets? We believe the reward investors have historically enjoyed for accepting the risk of less easily tradable assets —the so-called “illiquidity premium”—makes it worth their while to explore illiquid options, though there are pitfalls and guidelines to keep in mind.