Illiquidity Premium

“If you're going to do that, then you need to have some liquidity function, and that always is going to come at a cost. It could be an explicit cost, it could be an implicit cost, but at the end of the day, you can't magically say something that's illiquid is l…”

“To harvest the illiquidity premium, you have to take on the illiquidity risk. There is no free lunch. So these products, I think, are great. They will give you substantially similar exposures, but that liquidity profile is going to lead to slightly different p…”

“If you're getting paid 500 to 700 basis points for illiquidity, and you're a, either a perpetual institution by charter or just so massive that you effectively act like that, then Yes, that occupies a perfectly fine place in your portfolio.”

“There's been, I think, a great misunderstanding in recent years Among some people who run money, that illiquidity itself delivers degree of return. That if you take the illiquidity, you automatically get the return. I don't think anything could be weirder than…”

“Generally, when clients ask this, I say you ought to make several hundred basis points. I don't know if that's 200 or 500 basis points, but giving up the liquidity, the right to change your mind is worth a lot.”

“Somewhere along the way, the last five years or so, the Illiquidity premium somehow turned into an illiquidity discount. I don't really understand it. Used to be you demanded a higher return to lock up your capital, to lose the ability to make a change in mana…”

“This assumption that you get paid an illiquidity premium for anything that happens to be illiquid is I think dangerous. I think it is going to cause you not to be focused on the question of, all right, if I think this is about operational excellence, why do I …”

“There was a CIO of a big sovereign fund I know well who, during the crisis, was forced by his oversight committee to sell his public equities because people got scared, but couldn't sell his private equities, and told me later, he said, I don't need an illiqui…”

“Some people give up liquidity, and we all talk about an illiquidity premium in private equity and real It hasn't particularly shown itself recently, but you would think it would over time.”

“And then we came up with a Simple heuristic. Basically a hundred basis points per year. We think that we should be getting in terms of an illiquidity premium to lock up our money.”