The Benefits and Costs of Illiquidity

Hilary Till: Illiquidity is a common feature of alternative investments, whether one chooses venture capital, private equity, or hedge funds.

Author(s):

Hilary Till

Research Associate, EDHEC-Risk Institute

For hedge funds, the illiquidity can arise from the contracts an investor enters into, which may have one year or longer lock-ups or can arise from the type of investments that a hedge fund specialises in. A hedge fund’s investments may include over-thecounter derivatives instruments, which may be difficult to value, or small-capitalisation stocks, which may trade infrequently, for example.

Type: Working paper
Date: le 10/01/2004
Research Cluster : Finance

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