White Paper

Smoothing the flow in illiquid assets

Company: Standard Life Investments

Standard Life Investments case study

Category: Credit Risk

Published: 08 January 2016

Format:

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Overview

Infrastructure is the asset class that immediately comes to mind when we talk of illiquid assets, but participants said the universe also includes property, investments in businesses, equity-release mortgages and some exotic assets, such as farms and timber plantations.

The asset can be in the form of debt or equity and more often than not it is unlisted. Because they are harder to liquidate, these investments typically yield higher returns than investments in liquid assets with a similar level of credit risk. Insurers tend to use illiquid assets to back long-term annuity-like liabilities. However, in the current low yield environment, illiquid assets also find a place in portfolios backing shorter-term liabilities and shareholder funds.

This paper gives an insight into illiquid assets from 9 industry experts. Answering questions such as ‘What kind of tools and techniques do you use to measure liquidity?’ and ‘How do you approach the issue of credit risk?’

Categories related to Credit Risk