Navigating Illiquidity: Options for LPs
Liquidity solutions can be helpful in providing assistance to investors who need to dispose of distressed or illiquid assets. Here are some examples of liquidity solutions that may be available:
- Secondary market transactions: The sale of assets on the secondary market can provide a liquidity solution for investors who need to exit their positions. This can involve the sale of securities or other assets to other investors or financial institutions.
- Tender offers: A tender offer is a process whereby the fund manager offers to buy back a certain number of shares or units in the fund from investors. This can provide a way for investors to liquidate their holdings in the fund.
- Special purpose vehicles: A special purpose vehicle (SPV) can be created to hold illiquid assets that are difficult to sell on the open market. This can provide a way to pool these assets together and sell them to interested investors.
- Loan facilities: A loan facility can provide short-term funding to investors who need to exit their positions but cannot do so immediately. This can help to bridge the gap between the time that an investor needs to exit and the time when the assets can be sold.
It is important to note that liquidity solutions may not be available in all situations, and there may be costs and risks associated with using these solutions. As such, it is important to carefully consider the specific circumstances and consult with experienced professionals before pursuing any liquidity solution.