Income or Liquidity, What’s the Right Approach?

The financial crisis and persistent market volatility have intensified investor bias toward liquid securities. Unfortunately for investors, this increased demand has coincided with deteriorating yields for highly liquid assets in the public markets. Yields in more liquid assets have been decreasing due to a shortage of supply, while yields in less liquid parts of the market have been increasing due to a lack of demand. The result has been an increase in the illiquidity premium – that is, the difference in yield between liquid and less liquid securities. As investors’ demand for liquidity has increased, so too has the relative cost of owning a fully liquid portfolio. This presentation will discuss the mismatch between the demand for and supply of liquid securities and offer alternatives for those willing to employ a long-term alternative investment strategy.