The cost of being too liquid

Private markets have long offered an illiquidity premium, rewarding investors who can commit capital for seven to ten years. Institutions and family offices have used this approach for decades, and advisors are increasingly considering an “illiquidity bucket” to help clients stay disciplined and focused on long-term goals.

For high-net-worth investors, lower-minimum evergreen structures such as interval funds and tender-offer funds have made private equity, private credit, and private real estate more accessible. These vehicles can broaden diversification, but they still require patience because greater liquidity can come with cash drag and may limit upside.

The opportunity is meaningful in a market where public returns may be less compelling over time. The main risks are reduced access to capital when needed and the possibility that private markets will not always outperform public assets.

Advisors should size illiquid allocations based on each client’s cash flow needs, time horizon, and comfort with locking up assets. Used well, this framework can support better behavior in volatile markets while aligning portfolios with long-term objectives.