Market trends indicate that illiquid assets offer diversification and enhance a portfolio’s risk-adjusted return profile. Historically, institutional investors such as pension funds, insurance companies and foundations have been the primary beneficiaries of these investments, as their investment policies and long-term horizons allow them to fully capitalize on such strategies.

However, the appeal of these products is not limited to large institutional investors. Increasingly, family offices and high-net-worth individuals are showing a growing interest in these assets. “Incorporating illiquid assets can significantly reduce portfolio volatility since they are less correlated with public markets. There is now a greater understanding of their benefits, leading to a rising demand to include them in portfolios”, says Javier.

These assets also present an interesting alternative for high-net-worth individual investors, “as long as they have a clear view of their investment horizon and proper liquidity planning. It’s not just about the wealth size but rather the ability to maintain a disciplined strategy without being affected by the lack of liquidity. When these criteria are met, illiquid assets can play a key role in building a resilient portfolio”, Alemán adds.

Incorporating illiquid assets, therefore, helps to reduce portfolio volatility, especially when the strategy focuses on segments of the economy that are less exposed to traditional liquid assets, such as small and mid-sized companies (lower mid-market). Moreover, their long-term approach allows access to differentiated sources of return and greater value creation potential, ultimately enhancing the portfolio’s risk/return profile.

Within the illiquid asset universe, certain products further enhance diversification, such as funds of funds. Historically, they have demonstrated the ability to reduce risk by investing in a broad portfolio of companies managed by different teams and distributed across various industries, geographies, and currencies while still offering attractive returns. These strategies not only diversify portfolios but also enable investors to capture growth opportunities in a wide range of contexts, delivering higher long-term return potential.

You can read the full article here: “Del riesgo a la recompensa: cómo esta tendencia podría duplicar el patrimonio global en cinco años”