{"id":15359,"date":"2026-10-19T09:00:00","date_gmt":"2026-10-19T13:00:00","guid":{"rendered":"https:\/\/wellington-altus.ca\/?p=15359"},"modified":"2026-10-16T15:14:49","modified_gmt":"2026-10-16T19:14:49","slug":"when-wealth-is-diversified-but-not-liquid","status":"publish","type":"post","link":"https:\/\/wellington-altus.ca\/fr\/when-wealth-is-diversified-but-not-liquid\/","title":{"rendered":"When Wealth Is Diversified But Not Liquid"},"content":{"rendered":"<p class=\"has-medium-font-size wp-block-paragraph\">PRIVATE MARKETS AND THE TIMING OF CAPITAL<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"display:inline-block;height:1em\"><span style=\"display:none\">.<\/span><\/span><span style=\"font-size:13pt\"><em>A portfolio can contain many assets and still leave an investor without sufficient capital at the moment it is needed.<\/em><\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"display:inline-block;height:1em\"><span style=\"display:none\">.<\/span><\/span><span style=\"font-size:12pt\">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.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"display:inline-block;height:1em\"><span style=\"display:none\">.<\/span><\/span><span style=\"font-size:12pt\">As private market investments become a more significant part of sophisticated portfolios, the distinction between diversified holdings and liquidity ones becomes important.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"display:inline-block;height:1em\"><span style=\"display:none\">.<\/span><\/span><strong><span style=\"font-size:13pt\">Differentiating Diversification From Liquidity<\/span><\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"display:inline-block;height:1em\"><span style=\"display:none\">.<\/span><\/span><span style=\"font-size:12pt\">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.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"display:inline-block;height:1em\"><span style=\"display:none\">.<\/span><\/span><span style=\"font-size:12pt\">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.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"display:inline-block;height:1em\"><span style=\"display:none\">.<\/span><\/span><span style=\"font-size:12pt\">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.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"display:inline-block;height:1em\"><span style=\"display:none\">.<\/span><\/span><strong><span style=\"font-size:13pt\">Fund Structures For Capital Movements<\/span><\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"display:inline-block;height:1em\"><span style=\"display:none\">.<\/span><\/span><span style=\"font-size:12pt\">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\u2019s financing and diversification benefits, but also identified concerns related to leverage, borrower quality, valuation practices, data gaps and liquidity mismatches.\u00b9<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"display:inline-block;height:1em\"><span style=\"display:none\">.<\/span><\/span><span style=\"font-size:12pt\">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\u2019s repurchase capacity.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"display:inline-block;height:1em\"><span style=\"display:none\">.<\/span><\/span><span style=\"font-size:12pt\">In September 2026, Morgan Stanley\u2019s North Haven Private Income Fund received redemption requests equal to 11.4% of assets against a quarterly repurchase limit of 5%.\u00b2 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.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"display:inline-block;height:1em\"><span style=\"display:none\">.<\/span><\/span><strong><span style=\"font-size:13pt\">The Cost Of Accessing Liquidity<\/span><\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"display:inline-block;height:1em\"><span style=\"display:none\">.<\/span><\/span><span style=\"font-size:12pt\">There are several scenarios to consider when planning to access liquidity:<\/span><\/p>\n\n\n\n<div class=\"ul\" style=\"margin-top:0;margin-bottom:0;margin-left:0;margin-right:0\">\n<div class=\"li\" style=\"margin-top:0;margin-bottom:0;margin-left:0;margin-right:0\">\n<div style=\"margin-bottom:0;padding-bottom:0;line-height:1.38;font-size:11pt;margin-left:36pt\"><span style=\"display:inline-block;position:relative;text-indent:-18pt\"><span style=\"position:absolute;top:-0.34em;left:0;font-size:2em\">\u2022<\/span>&nbsp;<\/span><span style=\"font-size:12pt\">An asset may be contractually unavailable until a redemption window or exit, or only sellable at an unattractive price. <\/span><\/div>\n<\/div>\n<div class=\"li\" style=\"margin-top:0;margin-bottom:0;margin-left:0;margin-right:0\">\n<div style=\"margin-bottom:0;padding-bottom:0;line-height:1.38;font-size:11pt;margin-left:36pt\"><span style=\"display:inline-block;position:relative;text-indent:-18pt\"><span style=\"position:absolute;top:-0.34em;left:0;font-size:2em\">\u2022<\/span>&nbsp;<\/span><span style=\"font-size:12pt\">A secondary-market buyer could demand a discount to the reported asset value. <\/span><\/div>\n<\/div>\n<div class=\"li\" style=\"margin-top:0;margin-bottom:0;margin-left:0;margin-right:0\">\n<div style=\"margin-bottom:0pt;padding-bottom:0;line-height:1.38;font-size:11pt;margin-left:36pt\"><span style=\"display:inline-block;position:relative;text-indent:-18pt\"><span style=\"position:absolute;top:-0.34em;left:0;font-size:2em\">\u2022<\/span>&nbsp;<\/span><span style=\"font-size:12pt\">A credit facility may provide immediate funding, while also introducing interest expense, collateral requirements and refinancing risk.<\/span><\/div>\n<\/div>\n<\/div>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"display:inline-block;height:1em\"><span style=\"display:none\">.<\/span><\/span><span style=\"font-size:12pt\">The right question is not simply how much liquidity is available. It\u2019s how much can be accessed, when and on what terms. Consider this illustrative scenario (see Exhibit):<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"display:inline-block;height:1em\"><span style=\"display:none\">.<\/span><\/span><strong><span style=\"font-size:12pt\">Exhibit: Illustrative Portfolio Value vs. Accessible Capital<\/span><\/strong><\/p>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><tbody><tr><td>\n<p style=\"margin-top:0pt;padding-top:0;margin-bottom:0pt;padding-bottom:0;line-height:1.38;font-size:11pt\"><strong><span style=\"font-size:12pt\">Asset<\/span><\/strong><\/p>\n<\/td><td>\n<p style=\"margin-top:0pt;padding-top:0;margin-bottom:0pt;padding-bottom:0;line-height:1.38;font-size:11pt\"><strong><span style=\"font-size:12pt\">Value<\/span><\/strong><\/p>\n<\/td><\/tr><tr><td>\n<p style=\"margin-top:0pt;padding-top:0;margin-bottom:0pt;padding-bottom:0;line-height:1.38;font-size:11pt\"><span style=\"font-size:12pt\">Private Equity<\/span><\/p>\n<\/td><td>\n<p style=\"margin-top:0pt;padding-top:0;margin-bottom:0pt;padding-bottom:0;line-height:1.38;font-size:11pt\"><span style=\"font-size:12pt\">$4.0M<\/span><\/p>\n<\/td><\/tr><tr><td>\n<p style=\"margin-top:0pt;padding-top:0;margin-bottom:0pt;padding-bottom:0;line-height:1.38;font-size:11pt\"><span style=\"font-size:12pt\">Private Credit<\/span><\/p>\n<\/td><td>\n<p style=\"margin-top:0pt;padding-top:0;margin-bottom:0pt;padding-bottom:0;line-height:1.38;font-size:11pt\"><span style=\"font-size:12pt\">$2.0M<\/span><\/p>\n<\/td><\/tr><tr><td>\n<p style=\"margin-top:0pt;padding-top:0;margin-bottom:0pt;padding-bottom:0;line-height:1.38;font-size:11pt\"><span style=\"font-size:12pt\">Real Estate<\/span><\/p>\n<\/td><td>\n<p style=\"margin-top:0pt;padding-top:0;margin-bottom:0pt;padding-bottom:0;line-height:1.38;font-size:11pt\"><span style=\"font-size:12pt\">$2.0M<\/span><\/p>\n<\/td><\/tr><tr><td>\n<p style=\"margin-top:0pt;padding-top:0;margin-bottom:0pt;padding-bottom:0;line-height:1.38;font-size:11pt\"><span style=\"font-size:12pt\">Public Securities<\/span><\/p>\n<\/td><td>\n<p style=\"margin-top:0pt;padding-top:0;margin-bottom:0pt;padding-bottom:0;line-height:1.38;font-size:11pt\"><span style=\"font-size:12pt\">$2.0M<\/span><\/p>\n<\/td><\/tr><tr><td>\n<p style=\"margin-top:0pt;padding-top:0;margin-bottom:0pt;padding-bottom:0;line-height:1.38;font-size:11pt\"><strong><span style=\"font-size:12pt\">Total Portfolio Value<\/span><\/strong><\/p>\n<\/td><td>\n<p style=\"margin-top:0pt;padding-top:0;margin-bottom:0pt;padding-bottom:0;line-height:1.38;font-size:11pt\"><strong><span style=\"font-size:12pt\">$10.0M<\/span><\/strong><\/p>\n<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\"><strong><span style=\"font-size:12pt\">Near-Term Liquidity Position<\/span><\/strong><\/p>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><tbody><tr><td>\n<p style=\"margin-top:0pt;padding-top:0;margin-bottom:0pt;padding-bottom:0;line-height:1.38;font-size:11pt\"><strong><span style=\"font-size:12pt\">Item<\/span><\/strong><\/p>\n<\/td><td>\n<p style=\"margin-top:0pt;padding-top:0;margin-bottom:0pt;padding-bottom:0;line-height:1.38;font-size:11pt\"><strong><span style=\"font-size:12pt\">Value<\/span><\/strong><\/p>\n<\/td><\/tr><tr><td>\n<p style=\"margin-top:0pt;padding-top:0;margin-bottom:0pt;padding-bottom:0;line-height:1.38;font-size:11pt\"><span style=\"font-size:12pt\">Potentially Accessible Capital<\/span><\/p>\n<\/td><td>\n<p style=\"margin-top:0pt;padding-top:0;margin-bottom:0pt;padding-bottom:0;line-height:1.38;font-size:11pt\"><span style=\"font-size:12pt\">$2.0M<\/span><\/p>\n<\/td><\/tr><tr><td>\n<p style=\"margin-top:0pt;padding-top:0;margin-bottom:0pt;padding-bottom:0;line-height:1.38;font-size:11pt\"><span style=\"font-size:12pt\">Known Near-Term Funding Requirement<\/span><\/p>\n<\/td><td>\n<p style=\"margin-top:0pt;padding-top:0;margin-bottom:0pt;padding-bottom:0;line-height:1.38;font-size:11pt\"><span style=\"font-size:12pt\">$1.0M<\/span><\/p>\n<\/td><\/tr><tr><td>\n<p style=\"margin-top:0pt;padding-top:0;margin-bottom:0pt;padding-bottom:0;line-height:1.38;font-size:11pt\"><span style=\"font-size:12pt\">Capital Remaining Before Other Obligations<\/span><\/p>\n<\/td><td>\n<p style=\"margin-top:0pt;padding-top:0;margin-bottom:0pt;padding-bottom:0;line-height:1.38;font-size:11pt\"><span style=\"font-size:12pt\">$1.0M<\/span><\/p>\n<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"display:inline-block;height:1em\"><span style=\"display:none\">.<\/span><\/span><span style=\"font-size:12pt\">The remaining amount must also support potential capital calls, taxes, spending and unexpected needs. High net worth does not automatically equal liquid wealth.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong><span style=\"font-size:13pt\">Map Obligations And Funding Across Time<\/span><\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-size:12pt\">A liquidity plan can organize assets, obligations and available funding into three practical periods:<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong><span style=\"font-size:12pt\">Format:<\/span><\/strong><span style=\"font-size:12pt\"> Two-column table<\/span><\/p>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><tbody><tr><td>\n<p style=\"margin-top:0pt;padding-top:0;margin-bottom:0pt;padding-bottom:0;line-height:1.38;font-size:11pt\"><strong><span style=\"color:#000000;font-size:12pt\">Time Horizon<\/span><\/strong><\/p>\n<\/td><td>\n<p style=\"margin-top:0pt;padding-top:0;margin-bottom:0pt;padding-bottom:0;line-height:1.38;font-size:11pt\"><strong><span style=\"color:#000000;font-size:12pt\">Planning Focus<\/span><\/strong><\/p>\n<\/td><\/tr><tr><td>\n<p style=\"margin-top:3pt;padding-top:0;margin-bottom:3pt;padding-bottom:0;line-height:1.38;font-size:11pt\"><span style=\"font-size:12pt\">Next 12 months<\/span><\/p>\n<\/td><td>\n<p style=\"margin-top:3pt;padding-top:0;margin-bottom:3pt;padding-bottom:0;line-height:1.38;font-size:11pt\"><span style=\"font-size:12pt\">Operating cash, taxes, near-term commitments and a margin for unexpected needs<\/span><\/p>\n<\/td><\/tr><tr><td>\n<p style=\"margin-top:3pt;padding-top:0;margin-bottom:3pt;padding-bottom:0;line-height:1.38;font-size:11pt\"><span style=\"font-size:12pt\">1 to 3 years<\/span><\/p>\n<\/td><td>\n<p style=\"margin-top:3pt;padding-top:0;margin-bottom:3pt;padding-bottom:0;line-height:1.38;font-size:11pt\"><span style=\"font-size:12pt\">Debt maturities, capital calls, major purchases and expected distributions<\/span><\/p>\n<\/td><\/tr><tr><td>\n<p style=\"margin-top:3pt;padding-top:0;margin-bottom:3pt;padding-bottom:0;line-height:1.38;font-size:11pt\"><span style=\"font-size:12pt\">More than 3 years<\/span><\/p>\n<\/td><td>\n<p style=\"margin-top:3pt;padding-top:0;margin-bottom:3pt;padding-bottom:0;line-height:1.38;font-size:11pt\"><span style=\"font-size:12pt\">Long-term investments and capital that can tolerate uncertain exit timing<\/span><\/p>\n<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"display:inline-block;height:1em\"><span style=\"display:none\">.<\/span><\/span><span style=\"font-size:12pt\">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.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-size:12pt\">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.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-size:9pt\">Sources<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-size:9pt\">1. <\/span><a href=\"https:\/\/www.fsb.org\/2026\/05\/report-on-vulnerabilities-in-private-credit\/\"><span style=\"text-decoration:underline;color:#467886;font-size:9pt\">Financial Stability Board, Report on Vulnerabilities in Private Credit<\/span><\/a><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-size:9pt\">2. <\/span><a href=\"https:\/\/www.reuters.com\/markets\/wealth\/morgan-stanley-private-credit-fund-redemptions-remain-elevated-third-quarter-2026-09-18\/\"><span style=\"text-decoration:underline;color:#467886;font-size:9pt\">Reuters, Morgan Stanley Private Credit Fund Redemption Requests Remain Elevated<\/span><\/a><span style=\"font-size:9pt\"> <\/span><\/p>","protected":false},"excerpt":{"rendered":"<p>A portfolio can contain many assets and still leave an investor without sufficient capital at the moment it is needed.<\/p>","protected":false},"author":14,"featured_media":15348,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[166],"tags":[79],"class_list":["post-15359","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-quarterly-blog","tag-english"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v28.6 - 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