In its October 2024 Global Financial Stability Report, the International Monetary Fund raises liquidity-risk concerns regarding defined contribution plans and unit-linked insurance products — both of which have grown globally in recent years. Given workers bear any profits and losses of the underlying investments, defined contribution plans typically allow workers frequent opportunities to enter and exit investment options. As a result, “this flexibility may exacerbate liquidity mismatches between the underlying assets — especially illiquid assets, such as private equity and credit — and plan liabilities because the effective duration of the liabilities has been reduced,” according to the report.

As an example, the IMF notes Australian superannuation funds must allow workers to switch between different investment options generally within three business days, despite the fact these funds hold, on average, illiquid exposures exceeding 20 percent of their tota