PRIVATE MARKETS AND THE TIMING OF CAPITAL

.A portfolio can contain many assets and still leave an investor without sufficient capital at the moment it is needed.

.There are four common cases in private markets where the issue is a mismatch between when capital is needed and when it becomes available: an investor holds millions of dollars in assets and still faces an unexpected funding problem; an acquisition requires cash before a private equity distribution arrives; a significant tax payment coincides with a real estate refinancing; or an attractive investment opportunity arises when much of the portfolio is committed to assets that cannot readily be sold.

.As private market investments become a more significant part of sophisticated portfolios, the distinction between diversified holdings and liquidity ones becomes important.

.Differentiating Diversification From Liquidity

.Diversification describes how capital is spread among investments and economic exposures. Net worth measures the value of assets after liabilities. Liquidity concerns the amount of capital that can be accessed within a given period and on acceptable terms.

.For example, an investment holding is diversified across private equity, private credit, real estate and an operating business. And yet, the investor still depends on a relatively small pool of marketable securities for near-term spending and obligations. The portfolio is broad by asset class, narrow by access to cash.

.Private investments can provide access to companies, lending opportunities and return drivers that are not available in public markets. Their long holding periods also support longer term ownership. Those features are valuable precisely because the capital is committed. However, they should not be mistaken for ready liquidity.

.Fund Structures For Capital Movements

.The Financial Stability Board estimated that private credit represented US$1.5 trillion to US$2 trillion in assets at the end of 2024. Its 2026 review recognized the sector’s financing and diversification benefits, but also identified concerns related to leverage, borrower quality, valuation practices, data gaps and liquidity mismatches.¹

.Some private funds have finite lives. Investors commit capital that is drawn over time and receive distributions as underlying assets are sold or loans are repaid. Other vehicles offer periodic redemption windows with withdrawals limited when requests exceed a fund’s repurchase capacity.

.In September 2026, Morgan Stanley’s North Haven Private Income Fund received redemption requests equal to 11.4% of assets against a quarterly repurchase limit of 5%.² That experience does not describe every private fund, but it shows why a stated redemption feature is not the same as an assurance that all requested capital will be returned on a particular date.

.The Cost Of Accessing Liquidity

.There are several scenarios to consider when planning to access liquidity:

.The right question is not simply how much liquidity is available. It’s how much can be accessed, when and on what terms. Consider this illustrative scenario (see Exhibit):

.Exhibit: Illustrative Portfolio Value vs. Accessible Capital

Asset	Value
Private Equity	$4.0M
Private Credit	$2.0M
Real Estate	$2.0M
Public Securities	$2.0M
Total Portfolio Value	$10.0M

Near-Term Liquidity Position

Item	Value
Potentially Accessible Capital	$2.0M
Known Near-Term Funding Requirement	$1.0M
Capital Remaining Before Other Obligations	$1.0M

.The remaining amount must also support potential capital calls, taxes, spending and unexpected needs. High net worth does not automatically equal liquid wealth.

Map Obligations And Funding Across Time

A liquidity plan can organize assets, obligations and available funding into three practical periods:

Format: Two-column table

Time Horizon	Planning Focus
Next 12 months	Operating cash, taxes, near-term commitments and a margin for unexpected needs
1 to 3 years	Debt maturities, capital calls, major purchases and expected distributions
More than 3 years	Long-term investments and capital that can tolerate uncertain exit timing

.The purpose of this exercise is to compare obligations with realistic access to capital in each period. The analysis can include expected fund distributions, capital calls, credit facilities, business cash flows and other funding sources; then, test what happens if exits are delayed or several demands arrive at once.

Wealth measures what an investor owns; liquidity determines how much freedom that wealth provides. As such, the latter should be evaluated before it becomes necessary. A portfolio that accounts for the timing of commitments, distributions and available funding can allow long-term investments to remain invested through periods when selling would be costly or impractical.

Sources

1. Financial Stability Board, Report on Vulnerabilities in Private Credit

2. Reuters, Morgan Stanley Private Credit Fund Redemption Requests Remain Elevated