Publications

- June 1, 2022: Vol. 34, Number 6

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The liquidity riddle: Can we measure unlisted fund liquidity?

by Steven Devaney, Jane Fear and Maurizio Grilli

Liquidity is a well-known issue when investing in private real estate. A lack of liquidity deters some investors from participating in the asset class altogether, especially if their investment horizons are short, but it causes less concern for those who have longer investment horizons and are prepared to maintain a strategic allocation. Nonetheless, private real estate assets or vehicles might have to offer a liquidity premium within their expected returns to compensate for their lack of liquidity relative to other assets, such as equities and bonds. Although investors might have a strong intuitive sense of what is meant by liquidity, it is a concept that has several dimensions. This makes it hard to capture in a single metric or statistic, and so several indicators are needed to give a balanced picture of liquidity for a specific market or fund.

Less attention has been paid to the liquidity of private real estate funds compared with direct real estate, even though funds off

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