Liquidity and illiquidity: what is the right balance for private assets?

In the world of private equity, the balance between liquidity and illiquidity is of crucial importance. It's often tempting to think that it's best to steer clear of private equity investments, but the reality is quite different.

👉 Dans cet article, nous explorons pourquoi et examinons les principaux éléments auxquels VOUS, investisseurs potentiels, doivent être attentifs.<br><br><img src="/blog/liquidite-et-illiquidite-quel-equilibre-au-sein-des-actifs-prives/liquidite.jpg" alt= "La liquidité de fonds de private equity" class="small">Il est compréhensible que la notion d'investissement "illiquide", difficile à céder, soit généralement perçue comme négative et à éviter. <br>Cependant, cette perception mérite d'être nuancée. La détention d'actifs illiquides comporte de nombreux avantages, tandis que la possession d'actifs très liquides présente ses propres défis ! Pour les investisseurs chevronnés en private equity, l'illiquidité est un élément à considérer sérieusement, car investir en dehors des marchés publics peut réduire la volatilité et accroître les rendements.

👉 At Airfund, we're convinced that private equity investments provide diversification that was once impossible. Here are some key aspects to think about when considering liquidity and illiquidity when allocating your funds to private assets to be a true alternative investment pro!

‍Exposureto volatility: the most liquid investments, such as listed equities, offer the possibility of entering and exiting positions quickly. However, this increased liquidity is often accompanied by high volatility, exposing investors to market fluctuations. Private equity investments can offer a less volatile alternative, even if they are less liquid.

‍Long-term investment horizon: private investments often require a long-term commitment. While this can make illiquidity more binding, it also enables investors to support the development of companies over the long term, which can lead to higher returns.

‍Exit strategy: Although private equity investments are often considered illiquid, there are well-established exit strategies, such as the secondary market, which enable investors to sell their holdings at an opportune time.

‍Fund structure: the liquidity of an investment can be influenced by its structure. Open-ended and closed-end funds have different liquidity characteristics, with implications for portfolio volatility and investors' ability to exit.

‍Diversification ofinvestment horizon: Private equity offers a diverse range of investment opportunities, often inaccessible in the public markets. Incorporating unlisted assets into a portfolio can help diversify risks and broaden return prospects. De facto, private equity investments may be more illiquid than other assets, BUT they also offer significant advantages, including a potential reduction in volatility and higher long-term returns. For a balanced approach to an investment portfolio, we recommend combining liquid and illiquid assets for an optimal strategy!