Illiquid asset

An asset is illiquid when it cannot be turned into cash quickly at close to its carrying value. Private equity, property, unlisted shares and funds with long lock-ups are common examples. Policies cap them so the portfolio can still meet spending, capital calls and withdrawals.

The definition depends on the period chosen. Under SEC Rule 22e-4, an illiquid investment cannot reasonably be expected to sell within seven calendar days without significantly moving its value. A fund may not acquire one if more than 15% of its net assets would then be illiquid.

A cap such as “no more than 15% in illiquid assets” needs a stated test for each holding. Acclimetry’s illiquid assets limit applies an approved test, such as days to liquidate or lock-up, and infers nothing from asset class. Example: a 200 holding needing 30 days against a 10-day threshold is 20% illiquid, inside a 25% cap.