The Cost of Being Too Liquid

This report explores the benefits of the 'illiquidity premium' and argues that high-net-worth investors should adopt institutional-style 'illiquidity buckets' to enhance long-term returns.

Key Takeaways

• 1.Private markets like private equity, private credit, and real estate have historically provided an 'illiquidity premium' over public market equivalents.
• 2.High-net-worth investors should consider an 'illiquidity bucket' of 10%–20% for capital they can commit for 7–10 years to capture higher long-term returns.
• 3.New 'evergreen fund' structures (interval and tender-offer funds) are expanding private market access to HNW investors with lower minimums and more flexible liquidity than traditional funds.

Table of Contents

• Key points
• What does the data show?
• High-net-worth demand
• How much should advisors allocate to illiquid investments?
• Allocating to private markets
• The behavioral benefits of illiquidity
• Conclusion
• Contributors
• Definitions
• Methodology for Exhibit 1
• WHAT ARE THE RISKS?
• IMPORTANT LEGAL INFORMATION

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