The Illiquidity Premium: Why Many Wealthy Investors Lock Up Capital on Purpose
Most investors value having immediate access to their money, but liquidity comes at a cost. Many alternative investments, including private credit, private equity, and private real estate, require investors to commit capital for longer periods in exchange for the potential for higher returns. This concept, known as the **illiquidity premium**, has been utilized by institutional and high-net-worth investors for decades. Understanding the tradeoff between liquidity and opportunity can help accredited investors determine whether less liquid investments have a place in their long-term wealth strategy.
