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

Forthcoming: The Journal of Portfolio Management, Netspar Survey Paper 56, 2019

27 Pages Posted: 18 Oct 2019 Last revised: 11 Nov 2020

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

Abstract

This paper reports the results of a survey of nine Dutch (AUM EUR 342 billion) and five Canadian (AUM CAD 203 billion) pension funds and fiduciary managers on the investment and management decisions regarding illiquid assets. The Dutch pension funds in our sample invest 15% of their portfolio in illiquid assets, while for the Canadian pension funds this is 34%. We put forward three reasons for the stark difference in the average illiquid asset allocations: (1) the strong focus of Dutch survey participants on investment costs, which are made available to the public and higher for illiquid assets, (2) supervisory requirements, and (3) the division of Dutch pension fund assets into a liability matching portfolio and a return portfolio, which potentially leads to liquid assets crowding out illiquid assets. Regarding the management of illiquid assets, many survey participants report that they perform liquidity stress tests and have liquidity management policies to free up cash if necessary. We formulate four best practices based on these findings.

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). Forthcoming: The Journal of Portfolio Management, 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 Noord-Brabant 5000 LE
Netherlands

De Nederlandsche Bank - Research Department ( email )

P.O. Box 98
1000 AB Amsterdam
Netherlands

Patrick Tuijp

University of Amsterdam - Finance Group ( email )

Roetersstraat 18
Amsterdam, 1018WB
Netherlands

Ortec Finance ( email )

Orly Centre
Barajasweg 10
Amsterdam, 1043 CP
Netherlands

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