Not every investor has the benefit of a long time horizon, but many of Willis Towers Watson’s institutional investment clients do. Due to their liability structures, a significant number of pension funds, most sovereign wealth funds/endowments and some insurance companies, have the ability to ‘lock up’ their capital to some degree. This represents an important source of competitive advantage, with these investors able to harvest the higher returns on offer from illiquid assets.

However, even for our long-term clients, it is important to understand how much is on offer from a given asset class from time to time, and whether that is sufficient or not. After all, ‘what gets measured gets managed’, so if we do not have a good way of measuring illiquidity risk premia, how are we to manage and prioritise our exposure?