For years, liquidity was something you only worried about in a crisis — a variable in the background, not a front-line issue. But rising interest rates and persistent inflation have turned that equation upside down.
In June, U.S. consumer prices were running an annual CPI of 2.7%, above the Federal Reserve's comfort zone, while benchmark rates remain elevated at 4.25%–4.50%, unchanged since late 2024.
Institutional investors and fund managers are feeling the pressure, and they demand more agile, liquid structures for managing their capital. Liquidity today is no longer a passive consideration — it has become a strategic priority. Across the board, we are now seeing a pivot away from "patient capital" to a more tactical, real-time deployment of funds.
What's changing in investing?
Today, investors chase the highest possible returns. Instead, they want to know they can quickly and easily get their money back if needed. And this change in mindset is, in turn, driving increased interest in new strategies, markets and more flexible allocation models.
Secondaries, in particular, have emerged as a favored liquidity solution for private equity investors. In 2024, transactions in this market hit a record $160 billion, beating the previous high of $134 billion in 2021.
Evergreen funds are also attracting more attention. In Europe alone, assets under management in evergreen structures grew by 60% from 2023 to 2024, reaching nearly €63 billion by the end of the previous year. Thanks to their flexible subscription and redemption features, investors can enter and exit such funds more easily. Which is very much in demand right now.
Speaking in broader terms, more and more investors embrace "agile allocation" strategies — constant monitoring and redeploying capital based on live market signals rather than waiting for quarterly reports.
When liquidity can evaporate almost instantly, keeping an eye on things at all times is essential to ensure adjustments can be made quickly and worst outcomes avoided. That's a key lens through which portfolios are now being rebuilt.
Tokenization: Promise Without Demand Doesn't Sell
When tokenization was first marketed, it seemed like a great solution on paper. Turning real-world assets into digital tokens would "unlock liquidity" and democratize investing. But in practice, that promise often fails. Simply wrapping a hard-to-sell asset in a token doesn't make it easier to trade. If there's no market demand for the asset, tokenization won't solve that.
Take real estate, for example. Tokenized ownership of a poorly located building with weak rental yields is still an unattractive investment — no matter how you package it. We only need to look at the case of Aspen Coin for proof.
Back in 2018, a luxury ski resort was partially tokenized and hyped as one of the first tokenized real estate ventures. But after the initial fanfare settled down, very few buyers actually showed up, and liquidity levels did not measure up to expectations.
The underlying problem wasn't the technology — it was the lack of real demand. Market participation did not follow because investor interest waned. And that is a crucial point: liquidity isn't just about tech or structure. It's about whether the asset itself is appealing to buyers. Tokenization might offer wider access to investment, but without real demand, that's not going to matter.
Which is why I don't believe it is very realistic to expect tokenization to fix the broader liquidity issues. Some assets are illiquid for a reason — wrapping them up in digitization will not change that.
What the Market Actually Needs
The way I see it, the industry needs realism over hype. It needs tangible structural solutions instead of flashy wrappers or buzzwords that only serve to get temporary attention. This means rethinking fund design and developing execution strategies that account for volatility and market fragmentation.
Smart players are actively adapting. Hedge funds are reducing leverage and building cash buffers — essential when funding tightens or collateral demands spike. Some funds are also adopting Liquidity-at-Risk models that can calculate how much of a portfolio you can sell before prices are negatively impacted.
Quant firms are embedding liquidity signals into trading models to avoid AI-driven spirals. With so many strategies now reacting to the same headlines, the risk of artificially-triggered selloffs is very real and needs to be accounted for.
Asset managers are segmenting portfolios by liquidation speed — T+1, T+3, T+5, depending on how quickly they can be unwound. They are also employing tools like swing pricing and redemption gates — all to help plan ahead for orderly exits and avoid scrambling at the last minute.
In short: liquidity is not something to think about during or after the storm. When cracks start showing up, you need to be already prepared. So the best thing to do is to start planning well ahead.
Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.
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