An analysis of illiquid allocations across a universe of portfolios suggests that institution type and size may be the determining factors in how much capital is allocated to illiquid assets. We believe illiquid allocations should be based on the financial situation of the institution. Verus has developed a framework to analyze the impact illiquid asset programs have on the overall portfolio. This framework can be integrated with existing asset allocation studies to answer three strategic liquidity questions:
- Will private assets need to be sold to fund cash flow needs?
- What percent of the portfolio is being liquidated for cash flow needs?
- How likely is a breach of strategic asset allocation bands?