A Survey of Institutional Investors’ Investment and Management Decisions on Illiquid Assets

Netspar Survey Paper 56, 2019

42 Pages Posted: 18 Oct 2019 Last revised: 23 Dec 2019

See all articles by Kristy A.E. Jansen

Kristy A.E. Jansen

Tilburg University; De Nederlandsche Bank - Research Department

Patrick Tuijp

University of Amsterdam - Finance Group; Ortec Finance

Date Written: October 8, 2019


This paper reports the results of a survey of nine Dutch and five Canadian pension funds and fiduciary managers on the investment and management decisions regarding illiquid assets. The six Dutch pension funds in our survey represent total assets under management of EUR 342 billion and the four Canadian pension funds amount to CAD 203 billion. Dutch pension funds invest on average 14% of their portfolio in illiquid assets; for Canadian funds this equals 34%. The main reasons reported most often for investing in illiquid assets are the risk-return trade-off and the diversification benefits. Dutch pension funds generally use asset liability management studies to determine the allocation to illiquid assets, while Canadian pension funds may deviate from target allocations depending on a specified target return for illiquid assets. Pension funds in both countries apply upper limits to the percentage of funds invested in illiquid assets. Most survey participants have liquidity management policies to free up cash if necessary, such as maintaining a cash buffer, using the repo market or securities lending, and applying a specific sequence in which to liquidate positions. Many survey participants perform liquidity stress tests. We have formulated four best practices based on the results of the survey.

Keywords: illiquid assets, institutional investors, liquidity management, survey

JEL Classification: G11, G23

Suggested Citation

Jansen, Kristy A.E. and Tuijp, Patrick, A Survey of Institutional Investors’ Investment and Management Decisions on Illiquid Assets (October 8, 2019). Netspar Survey Paper 56, 2019. Available at SSRN: https://ssrn.com/abstract=3467770 or http://dx.doi.org/10.2139/ssrn.3467770

Kristy A.E. Jansen (Contact Author)

Tilburg University ( email )

P.O. Box 90153
Tilburg, DC 5000 LE

De Nederlandsche Bank - Research Department ( email )

P.O. Box 98
1000 AB Amsterdam

Patrick Tuijp

University of Amsterdam - Finance Group ( email )

Roetersstraat 18
Amsterdam, 1018WB

Ortec Finance ( email )

Orly Centre
Barajasweg 10
Amsterdam, 1043 CP

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