An illiquid asset or position cannot be sold quickly without a substantial price concession or significant transaction difficulty. Finding a buyer and converting it to cash at a fair price may take months or years. section 12.2 section 1.2.9
Evaluate an illiquid position by checking:
- Exit speed: determine whether selling is immediate, slow, or dependent on finding a specialized buyer. section 1.2.9
- Price uncertainty: account for vague valuations, unpredictable returns, and the possibility of losing most or all invested capital. section 12.2
- Carrying burden: include maintenance, storage, insurance, or management difficulties where relevant. section 1.2.9
Private equity and real estate
Private equity can offer exceptional percentage gains but may remain difficult to value and sell until an exit. Real estate similarly requires finding a buyer, while landlords face tenant and property risks. section 12.2 section 1.2.9
