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.
