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Is The Illiquidity Premium Worth It?

Is The Illiquidity Premium Worth It?

Alternative investments, such as private equity and private debt, generally require investors to commit funds for a specified lockup period. The lack of liquidity is usually compensated for with the illiquidity premium, which provides compensation for the associated loss of investment flexibility. But is this premium worth the added risk? Is the illiquidity premium worth its extra returns?  A recent report from Morgan Stanley suggests not. Indeed, according to the report, compiled by analysts Martin Leibowitz and Anthony Bova, over the period 1990…

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