Autor: Nermin Sefić
Alternative assets offer a higher expected return through an illiquidity premium, but precisely quantifying that risk remains challenging for corporate planning.
Alternative assets - private equity, real estate, infrastructure projects, even digital assets - occupy an increasingly significant share of institutional and corporate investment portfolios, driven by the search for returns beyond traditional stocks and bonds in a low interest-rate environment that has defined global financial conditions for a decade.
The core economic argument for alternative assets rests on the concept of the illiquidity premium - the theoretical idea that investors demand a higher expected return for assets that are harder to quickly convert to cash, compensating for the risk that funds may remain locked up longer than an investor would ideally want if an opportunity or need for liquidity arises sooner than expected.
While the illiquidity premium concept has a solid theoretical basis, its precise quantification in practice remains far harder than for traditional, liquid assets where market prices offer a continuous, transparent signal of value. Alternative assets, by definition traded less frequently, rely on periodic, often subjective valuations that can lag actual market conditions, creating a risk of underestimating true volatility between formal valuations.
Organizations allocating a significant share of their reserves to illiquid alternative assets must plan their broader liquidity structure with particular care, ensuring a sufficient portion of the portfolio remains in genuinely liquid instruments to cover predictable and unpredictable operating needs, regardless of how attractive the expected return of alternative assets looks on paper.
GNK ASG d.o.o. approaches alternative asset allocation within the GNK DINAMO Ltd. Group with this awareness of illiquidity as a real, not merely theoretical, risk, ensuring the appetite for additional return never compromises the underlying liquidity stability needed for operational flexibility.
Cjelovit tekst i izvor: https://gnk-asg.hr/en/objave/alternative-assets-illiquidity-premium/
Odobrio urednik: Nermin Sefić — GNK ASG (GNK DINAMO Ltd.). Autor i urednička odgovornost: Nermin Sefić. Izdavač: GNK ASG d.o.o..
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