Glossary
Illiquidity Premium
The Illiquidity Premium is the additional return that investors expect as compensation for committing capital over a long period without the ability to sell at any time. It is a central characteristic of Private Markets such as Private Equity or Private Debt.
At a glance
- Private Markets investments are typically locked up for several years.
- The premium is an expectation, not a guaranteed additional return.
- It compensates for restricted tradability and the longer commitment of capital.
Frequently asked questions
No. The Illiquidity Premium is an expected compensation for the longer capital commitment, not a promised additional return. It can vary depending on the investment and market conditions, or may not materialise at all.
Part of the topic
Private Markets
This entry is for general information purposes only and does not constitute investment, legal or tax advice. It is a simplified summary of the legal position and tax treatment.