Illiquid Assets (FRM Part 2 2023 - Book 4 - Chapter 19)

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After completing this reading, you should be able to:
- Explain the essential features of illiquid markets.
- Explain the effects of market imperfections to illiquidity.
- Assess the effects of biases on the reported illiquid assets returns.
- Explain the Geltner-Ross-Zisler unsmoothing process and state its properties.
- Compare liquidity premiums across as well as within asset categories.
- Explain portfolio choice decisions on the incorporation of illiquid assets.

[@mateovera2726]

I recently watched a video by Ben Felix, a PM at PWL Capital. He presented some very convincing arguments debunking the diversification that alternatives provide. He mentions that correlations with public markets have become very strong since ~2008. What's your take on this? Do you believe alternatives still provide a value-add to a portfolio?

[@analystprep]

It could very well be the case, but we do not want to take position on this. Also, the term 'alternative investments' can include private equity, cryptocurrencies, gold, etc. which do not all have the same risk profiles. We simply present that is included in the GARP books so you can pass your exams 😉