Is this the top of deep, liquid markets? Not quite – however the model has modified.
Liquidity is not any longer an abstract concept; it’s tested in real time. Private markets are illiquid; that’s well understood. The problem is that liquidity is increasingly managed on the product level, often creating expectations that won’t delay under stress.
This is a subtle but vital shift – from an asset to what a product guarantees.
- Practitioners all the time asked themselves: How liquid is that this asset?
- Now it’s best to ask yourself: How does this product make it appear liquid – and when does it break?
We see it within the pressure to repay personal loans. The broader ecosystem is showing signs of strain: Business Development Companies (BDCs) are trading at persistent discounts to net asset value (NAV), withdrawals are being restricted, capped or delayed, secondary markets are operating at discounts and fundraising has slowed, while distribution on paid-up capital (DPI) is weaker.
These should not isolated dislocations; They reflect a change in the way in which liquidity is designed and provided. What once felt like a stable feature of markets is now proving conditional and increasingly vulnerable under stress.
