RT Journal Article
SR Electronic
T1 A Primer on Liquidity from an Asset Management and Asset Allocation Perspective
JF The Journal of Portfolio Management
FD Institutional Investor Journals
SP 77
OP 95
DO 10.3905/jpm.2022.48.6.077
VO 48
IS 6
A1 Harshdeep Ahluwalia
A1 Anatoly Shtekhman
A1 Venky Venkatesh
A1 Yu Zhang
YR 2022
UL https://pm-research.com/content/48/6/77.abstract
AB It’s vital to effectively manage liquidity because its absence can result in significant losses, especially during periods of market turmoil. In this article, the authors discuss the practical aspects of managing liquidity within funds and multiasset portfolios. It complements existing research by providing a primer on the topic of liquidity from the unique perspectives of both asset managers and asset allocators. As it relates to funds, the authors provide an overview of the importance of managing liquidity and regulations surrounding it; liquidity classification of broad assets and subasset categories; and liquidity measurement, monitoring, and management programs. For asset allocators, the article discusses important elements such as 1) incorporating liquidity assumptions of illiquid assets into an asset allocation optimization approach and 2) a rebalance method selection framework and liquidity considerations.