Economic and Market Commentary

Seven Lessons in Liquidity

Executive Summary

  • Elevated valuations have pushed investors toward higher-yielding, often less liquid assets.
  • This shift and the public collapse of several well-known investment funds have made liquidity risk more important than ever.
  • However, the process of characterizing liquidity risk is far from straightforward, and conventional wisdom can be dangerously misleading.
  • In this piece, we describe seven lessons in liquidity that may help investors and managers prepare for the next crisis.

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